Reitmans Canada Limited is a leading Canadian retailer

that operates #255

Reitmans (Canada) Limited is a leading Canadian retailer that operates more than 900 stores
under the Reitmans, Smart Set, RW & Co., Thyme Maternity, Penningtons, and Addition Elle
banners. The following information is an extract from Reitmans’ annual report for its fiscal year
ended February 1, 2014.Reitmans’ depreciation policies for its property and equipment state
that:Depreciation is recognized in net earnings on a straight-line basis over the estimated useful
lives of each component on an item of property and equipment. Land is not depreciated.
Leasehold improvements are depreciated over the lesser of the estimated useful life of the
asset and the lease term. Assets not in service include expenditures incurred to-date for
equipment not yet available for use. Depreciation of assets not in service begins when they are
ready for their intended useThe estimated useful lives for the current and comparative periods
are as follows:Buildings.......... 10 to 50 yearsFixtures and equipment..... 3 to 20 yearsLeasehold
improvements.... 6.7 to 10 yearsIntangible assets are comprised of software and acquired
trademarks and their useful lives are assessed to be either finite or indefinite.Purchased
software that is integral to the functionality of the related equipment is capitalized as part of that
equipment. Reitmans’ trademarks were considered to have indefinite useful lives. During the
year ended February 1, 2014, the full cost of $499 thousand of trademarks was subject to an
impairment loss of $499 thousand.Required:a. Determine the average age percentage of
Reitmans’ property and equipment. Compare this with the ratio determined for Danier in the
chapter and identify which company would be able to go longer without replacing its assets
based on this ratio.b. Determine the average age (in years) of Reitmans’ leasehold
improvements. Compare this with the ratio determined for Danier in the chapter and identify
which company’s leased stores are newer.c. Given that Reitmans estimates that its fixtures and
equipment will have useful lives between 3 and 20 years, determine the annual straight-line
depreciation rate that Reitmans is using for its fixtures and equipment.d. Explain, in your own
words, why Reitmans does not begin depreciating assets until they are ready for their intended
use.e. Explain, in your own words, what Reitmans’ management is saying with respect to
purchased software being capitalized as part of equipment costs. What would be the alternative
treatment?f. Explain, in your own words, what Reitmans’ management is saying about the
company’s trademarks.g. If Reitmans’ net carrying amount for property and equipment was
$178,341 thousand for its year ended February 1, 2014, and $205,131 thousand for its year
ended February 1, 2013, and its sales revenue was $960,397 thousand for fiscal year ended
February 1, 2014, determine the company’s fixed asset turnover ratio. Compare this with the
ratio determined for Danier in the chapter and comment on which company did a better job of
using its long-term assets to generate revenues.View Solution:
Reitmans Canada Limited is a leading Canadian retailer that operates

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