{"id":216049,"date":"2025-05-18T12:26:36","date_gmt":"2025-05-18T12:26:36","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=216049"},"modified":"2025-05-18T12:26:38","modified_gmt":"2025-05-18T12:26:38","slug":"harley-davidsons-financial-statements-provide-the-following-information-in-millions-of-dollars","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/18\/harley-davidsons-financial-statements-provide-the-following-information-in-millions-of-dollars\/","title":{"rendered":"Harley-Davidson’s financial statements provide the following information (in millions of dollars)"},"content":{"rendered":"\n

0.0\/3.0 points (graded)
Harley-Davidson’s financial statements provide the following information (in millions of dollars):
As of Dec 31 ($ in millions) Property, Plant and Equipment (Less: Accumulated Depreciation) Property, Plant and Equipment, net
2017 2016 $3,050 $2, ($820) ($710) $2,230 $2,190
During 2017, Harley sold PP&E for $1,170 Million in cash. The property was originally purchased for $940 and had accumulated depreciation of $440 million. There were no asset write-offs during 201
How much depreciation expense did Harley record on its PP&E for the fiscal year ended 2017?
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Suppose that because of trade issues, Harley must move much of its production to Europe. As a consequence, the value of their net PP&E falls to $550 million on January 1, 2018. What transaction would they record?
Cash + Noncash Assets – Contra Assets = Liabilities
Shareholders Equity<\/p>\n\n\n\n

The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n

Part 1: Depreciation Expense Calculation for 2017<\/strong><\/h3>\n\n\n\n

We are given the following:<\/p>\n\n\n\n

    \n
  • Net PP&E (2016):<\/strong> $2,190 million<\/li>\n\n\n\n
  • Net PP&E (2017):<\/strong> $2,230 million<\/li>\n\n\n\n
  • PP&E sold:<\/strong>\n
      \n
    • Original cost = $940 million<\/li>\n\n\n\n
    • Accumulated depreciation = $440 million<\/li>\n\n\n\n
    • Cash proceeds = $1,170 million<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n

      Step-by-step:<\/h4>\n\n\n\n

      1. Calculate purchases of PP&E:<\/strong>
      We use the formula:<\/p>\n\n\n\n

      \n

      Ending Net PP&E = Beginning Net PP&E + Purchases \u2013 Depreciation \u2013 Net Book Value of Assets Sold<\/strong><\/p>\n<\/blockquote>\n\n\n\n

      We rearrange to find Depreciation<\/strong>:<\/p>\n\n\n\n

      \n

      Depreciation = Beginning Net PP&E + Purchases \u2013 Ending Net PP&E \u2013 Net Book Value of Assets Sold<\/strong><\/p>\n<\/blockquote>\n\n\n\n

      We don\u2019t know purchases, so we solve for it indirectly.<\/p>\n\n\n\n

      But let’s use another approach using Gross PP&E<\/strong> and Accumulated Depreciation<\/strong>:<\/p>\n\n\n\n

        \n
      • Gross PP&E 2016 = $3,050 million<\/li>\n\n\n\n
      • Gross PP&E 2017 = $3,050 + new purchases \u2013 $940 (asset sold)<\/li>\n<\/ul>\n\n\n\n

        Let\u2019s call new purchases = X<\/strong><\/p>\n\n\n\n

        So:
        Gross PP&E 2017 = $3,050 + X \u2013 $940 = $2,110 + X<\/p>\n\n\n\n

        We know Gross PP&E 2017 = $2,950 million (calculated from: Net PP&E = $2,230 + Acc. Depreciation = $720 \u2192 Gross = $2,950)<\/p>\n\n\n\n

        So:<\/p>\n\n\n\n

        \n

        $2,110 + X = $2,950 \u2192 X = $840 million<\/strong> (New purchases)<\/p>\n<\/blockquote>\n\n\n\n

        Now calculate Depreciation Expense<\/strong> using accumulated depreciation:<\/p>\n\n\n\n

        Accum. Depreciation:<\/p>\n\n\n\n

          \n
        • 2016: $820 million<\/li>\n\n\n\n
        • 2017: $720 million<\/li>\n<\/ul>\n\n\n\n

          However, Harley removed<\/strong> $440 million of depreciation with the asset sale. So:<\/p>\n\n\n\n

          \n

          Acc. Depr. 2016 + Depreciation \u2013 $440 = Acc. Depr. 2017
          $820 + Depreciation \u2013 $440 = $720
          Depreciation = $340 million<\/p>\n<\/blockquote>\n\n\n\n

          \u2705 Answer: $340 million depreciation expense recorded in 2017<\/strong><\/h3>\n\n\n\n
          \n\n\n\n

          Part 2: Impact of Net PP&E Falling to $550 million on Jan 1, 2018<\/strong><\/h3>\n\n\n\n

          Net PP&E drops from $2,230 million to $550 million. This means Harley wrote down or disposed of $1,680 million in net PP&E.<\/p>\n\n\n\n

          This could be due to:<\/p>\n\n\n\n

            \n
          • Sale<\/li>\n\n\n\n
          • Asset impairment\/write-down (most likely since value dropped due to production relocation)<\/li>\n<\/ul>\n\n\n\n

            Journal Entry for Write-down:<\/h3>\n\n\n\n
            Cash<\/th>Noncash Assets (PP&E)<\/th>Contra Assets (Accum. Depr.)<\/th>Liabilities<\/th>Shareholders’ Equity<\/th><\/tr><\/thead>
            0<\/td>\u2193 $1,680<\/td>0<\/td>0<\/td>\u2193 $1,680<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

            Explanation:<\/strong><\/p>\n\n\n\n

            This is treated as an impairment loss<\/strong>, which reduces PP&E<\/strong> (noncash assets) directly. There is no change to cash or liabilities. The loss impacts Shareholders\u2019 Equity<\/strong> via a decrease in retained earnings (through the income statement).<\/p>\n\n\n\n

            No change in contra assets<\/strong> (e.g., accumulated depreciation), because impairments bypass them and go directly to net asset value.<\/p>\n\n\n\n

            \n\n\n\n

            \u2705 Answer:<\/strong><\/h3>\n\n\n\n
            Cash<\/th>Noncash Assets<\/th>Contra Assets<\/th>Liabilities<\/th>Shareholders’ Equity<\/th><\/tr><\/thead>
            0<\/td>\u20131,680<\/td>0<\/td>0<\/td>\u20131,680<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

            This represents an impairment loss reducing net PP&E and equity.<\/p>\n","protected":false},"excerpt":{"rendered":"

            0.0\/3.0 points (graded)Harley-Davidson’s financial statements provide the following information (in millions of dollars):As of Dec 31 ($ in millions) Property, Plant and Equipment (Less: Accumulated Depreciation) Property, Plant and Equipment, net2017 2016 $3,050 $2, ($820) ($710) $2,230 $2,190During 2017, Harley sold PP&E for $1,170 Million in cash. The property was originally purchased for $940 and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-216049","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/216049","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=216049"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/216049\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=216049"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=216049"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=216049"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}