Focus on Financials | Amazon.com, Inc. (Learning Objectives 2, 3, 6: Analyze activity in plant…

Focus on Financials | Amazon.com, Inc. (Learning Objectives 2, 3, 6: Analyze activity in plant…

Focus on Financials | Amazon.com, Inc.

(Learning Objectives 2, 3, 6: Analyze activity in plant assets) Refer to Amazon.com, Inc.’s Consolidated Financial Statements in Appendix A at the end of the book, and answer the following questions:

1. Refer to Note 1 and Note 3 of the Notes to Consolidated Financial Statements. What kinds of assets are included in fixed assets of Amazon.com, Inc?

2. Which depreciation method does Amazon.com, Inc., use for reporting to stockholders and creditors in the financial statements? What type of depreciation method does the company probably use for income tax purposes? Why is this method preferable for tax purposes?

3. Depreciation expense is embedded in operating expense accounts listed on the income statement, so you can’t break out the actual figure for depreciation in that way. Refer to Note 3—Fixed Assets. How much was Amazon.com, Inc.’s depreciation expense on fixed assets during 2012? What did this figure include? How much was Amazon.com, Inc.’s accumulated depreciation on fixed assets at the end of 2012? Explain why accumulated depreciation exceeds depreciation expense for the current year.

4. How much did Amazon.com, Inc., spend on fixed assets, including internal-use software and website development, during 2012? In 2011? Evaluate the trend in these capital expenditures as to whether it conveys good news or bad news for Amazon.com, Inc. Explain.

5. Refer to Notes 1 and 4 of the Notes to Consolidated Financial Statements. What are Amazon.com, Inc.’s intangible assets? How does the company account for each of these intangibles over its lifetime?

 

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