Delta Airlines Property, Plant, and Equipment Research
Assignment 1: Delta Airlines Property, Plant, and Equipment
Due Week 8 and worth 200 points
According to the textbook, U.S. companies and foreign companies are affected by deprecation rules. When companies write off the cost of long-lived assets over a period of time, the term used is depreciation.
In order to complete this assignment, review Delta Airlines' annual reports for the years 2012 and 2013, located at http://ir(dot)delta(dot)com/stock-and-financial/sec-filings/.
Write a five to six (5-6) page paper in which you:
Briefly outline Delta Airlines company's history, products, and services, and identify the costs reported in the balance sheet for property, plant, and equipment. Prepare a horizontal analysis of Delta's property, plant, and equipment for 2012 and 2013. Next, calculate the asset turnover ratio, return on asset ratio, and the debt to total assets ratio. Based on your calculations, indicate the conclusions that you can draw, based on the changes in property, plant, and equipment.
Determine the method or methods of depreciation that Delta Airlines uses to depreciate its property, plant, and equipment. Suggest three (3) alternative methods that Delta Airlines could use in order to depreciate assets. Based on your suggestions, propose the method that Delta Airlines could use in order to improve the reporting of its property, plant and equipment. Provide a rationale for your response.
Analyze the information disclosed in Delta Airlines' notes to their financial statements on property, plant, and equipment. Recommend additional data that Delta Airlines could include that would be useful to potential investors and creditors.
Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
Include a cover page containing the title of the assignment, the student's name, the professor's name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
Demonstrate, analyze, and explain the proper accounting for acquisition and valuation of property, plant, and equipment; valuation; costs subsequent to acquisition; and disposition of plant assets.
Demonstrate, analyze, and explain the proper accounting for depreciation, impairments, and depletion.
Use technology and information resources to research issues in intermediate accounting.
Write clearly and concisely about intermediate accounting using proper writing mechanics.
Delta Air Lines, Inc.
Name:
Institution:
Date:
Delta Air Lines, Inc.
Historical Background
Delta Air Lines, Inc. excels due to the safe and reliable customer services, air transportation and hospitality services among others. The company envisions a growth at its traditions of superior customer service with the aim of exceeding their expectations while ensuring that all their services reach new heights. Initially, the company began in 1924 as a crop dusting service led by Collet Everman Woolman who was an agricultural scientist and a pilot. The company was incorporated in 1967 which as schedules on air transport for both passengers and cargo within the USA and at the global level (Delta, 2017).
The company has two large segments namely the Airline and Refinery with a network route on the hub, international gateways and 13 airports in the USA alone. The operations include fights that collect and distribute traffic from markets in the areas around the hub or gateway to both domestic and international cities. Other network routes include joint ventures, alliances with different foreign airlines and subsidiaries such as Monroe Energy, LLC and MIPC, LLC. Other businesses under Delta Air Lines, Inc include aircraft maintenance, overhaul (MRO), repair, wholesale vacation operations, private jet services and staffing. The airline section is under the single business unit with scheduled air transportation for both cargo and passengers with a flight equipment of one fleet deployed via a single route schedule system (Delta, 2017).
On a separate note, the refinery section deals in gasoline, jet fuel and diesel with non-jet fuel products in Monroe. In most cases, the jet fuel is availed through its production as well as though agreements with different third parties. In the year 2000, the enterprise gained a net profit of $ 1billion with a record of 117 million passengers with extended routes that served 221 cities in 48 states as well as 118 cities in 47 foreign nations (Delta, 2017).
Costs based on Balance Sheet for Property, Plant, and Equipment
USD $ in millions
Dec 31, 2013
Dec 31, 2012
Flight equipment
23,373
21,481
Ground property and equipment
4,596
4,254
Flight and ground equipment under capital leases
1,296
1,381
Advance payments for equipment
381
253
Property and equipment, gross
29,646
27,369
Accumulated depreciation and amortization
-7,792
-6,656
Property and equipment, net
21,854
20,713
Source: Based on data from Delta Air Lines Inc. Annual Reports
Source: -analysis-on.net
(Delta Air Lines, 2017).
Horizontal Analysis (Developed from scratch)
Delta Air Lines Inc., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions
Dec 31, 2012
% change in 2012
Dec 31, 2013
% Change in 2013
Flight equipment
21,481
0
23,373
8.808
Ground property and equipment
4,254
0
4,596
8.039
Flight and ground equipment under capital leases
1,381
0
1,296
-6.15
Advance payments for equipment
253
0
381
50.59
Property and equipment, gross
27,369
0
29,646
8.32
Accumulated depreciation and amortization
-6,656
0
-7,792
17.07
Property and equipment, net
20,713
0
21,854
5.509
Calculated Ratios
Delta Air Line, Inc. Balance Sheet for 2012 and 2013:
Assets
The fiscal year is January-December. All values USD Millions.
2013
2012
Cash & Short Term Investments
3,925
3,749
Cash Only
2,966
2,791
Short-Term Investments
959
958
Total Accounts Receivable
1,609
1,693
Accounts Receivables, Net
1,609
1,693
Accounts Receivables, Gross
1,632
1,729
Bad Debt/Doubtful Accounts
(23)
(36)
Accounts Receivable Turnover
23.39
21.66
Inventories
1,063
1,023
Raw Materials
1,063
1,023
Other Current Assets
3,054
1,807
Miscellaneous Current Assets
3,054
1,807
Total Current Assets
9,651
8,272
Net Property, Plant & Equipment
21,854
20,713
Property, Plant & Equipment - Gross
29,646
27,369
Machinery & Equipment
27,969
25,735
Leases
1,296
1,381
Other Property, Plant & Equipment
381
253
Accumulated Depreciation
7,792
6,656
Intangible Assets
14,452
14,473
Net Goodwill
9,794
9,794
Net Other Intangibles
4,658
4,679
Other Assets
1,303
1,092
Tangible Other Assets
1,303
1,092
Total Assets
59,394
44,550
Liabilities & Shareholders' Equity
All values USD Millions.
2013
2012
ST Debt & Current Portion LT Debt
1,547
1,627
Current Portion of Long Term Debt
1,547
1,627
Accounts Payable
2,300
2,293
Income Tax Payable
673
585
Other Current Liabilities
9,632
8,765
Accrued Payroll
1,926
1,680
Miscellaneous Current Liabilities
7,706
7,085
Total Current Liabilities
14,152
13,270
Current Ratio
0.68
0.62
Quick Ratio
0.61
0.55
Cash Ratio
0.28
0.28
Long-Term Debt
9,795
11,082
Long-Term Debt excl. Capitalized Leases
9,396
10,599
Non-Convertible Debt
9,396
10,599
Capitalized Lease Obligations
399
483
Provision for Risks & Charges
12,392
16,005
Deferred Taxes
(4,992)
2,047
Deferred Taxes - Credit
7,142
2,047
Deferred Taxes - Debit
12,134
-
Other Liabilities
4,270
4,277
Other Liabilities (excl. Deferred Income)
1,711
1,649
Deferred Income
2,559