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NCC 5000
Financial
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2015
NCC 5000 FINANCIAL ACCOUNTING
ROBERT LIBBY
Snyders-Lance Cases
Snyders-Lance Solutions
1st Exam Summer 1995
Other Cases
page 3
page 27
page 45
page 63
Intel (A)
Dennys
Cash Flow (B)
Intel (B)
Cash Flow (C)
Honda Motor
Kimberly-Clark (A)
Nabors Industries
Kimberly-Clark (B)
5.
6.
7.
8.
Practice Quiz 1s
Practice Old Midterms
Practice Quiz 2s
Practice Old Finals
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page 119
page 133
page 221
page 235
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Snyders-Lance Cases
Snyders Lance
Snyders Lance
Snyders Lance
Snyders-Lance
Snyders-Lance
Snyders-Lance
Snyders-Lance
Snyders-Lance
Snyders-Lance
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
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Snyders-Lance (A)
Required: Review the Snyders-Lance 2011 Annual Report. Look at the Income Statement,
Balance Sheet, and Cash Flow Statement closely and attempt to infer what kinds of information
they report. Then, answer the following questions based on the Report.
1. What types of products do they manufacture and sell?
2. Did the management think that the company had a good year?
3. On what day of the year does their fiscal year end?
4. For how many years do they present complete:
a. Balance Sheets
b. Income Statements
c. Cash Flow Statements
5. Are their financial statements audited by independent CPAs? How did you know?
6. Did their total assets increase or decrease over the last year?
7. What was the ending balance of inventories?
8. Write out their basic accounting equation in dollars at year-end.
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Snyders-Lance (B)
Required: Answer the following questions based on the Snyders-Lance 2011 Annual Report.
1. Between 2010 and 2011, did "Cost of Sales" increase at a faster or slower rate than "Net
Revenue?"
2. Using the Statement of Stockholders Equity, determine cash dividends declared to
stockholders during 2011. Does this differ from the cash dividends paid to stockholders
reported on the 2011 Cash Flow Statement? Why or why not?
3. The 2011 Income Statement reports "Income tax expense." What amount is reported? Is this
likely to be the same amount as that actually paid in income tax for the period? Why or why
not? (Check the Supplemental information to the cash flow statement to see if your
intuition is correct.)
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(in thousands)
Finished goods
Raw materials
Supplies, etc.
Total inventories at FIFO cost
Less: adjustment to reduce FIFO cost to LIFO cost
Total inventories
2008
23,227 $
11,556
15,293
50,076
(6,964)
$ 43,112 $
2007
21,910
7,701
14,297
43,908
(5,249)
38,659
If Snyders-Lance had used FIFO to value its entire inventory, how much higher or lower
would each of the following amounts have been?
a. For the year ended December 27, 2008:
a. Cost of goods sold:
b. Net income before taxes:
c. Income tax expense (provision for income taxes)
d. Net income:
e. Inventory on December 27, 2008:
b. For the life of the company as of December 27, 2008:
a. Cost of goods sold.
b. Cumulative net income before taxes:
c. Income tax expense
d. Retained earnings
2. Its inventory note from the 2009 report is printed below:
NOTE 4. INVENTORIES
Inventories at December 26, 2009 and December 27, 2008 consisted of the following:
(in thousands)
Finished goods
Raw materials
Supplies, etc.
Total inventories at FIFO cost
Less: adjustments to reduce FIFO cost to LIFO cost
Total inventories
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2009
2008
33,060 $
23,227
11,732
11,556
19,081
15,293
63,873
50,076
(5,836)
(6,964)
$ 58,037 $
43,112
If Snyders-Lance had used FIFO to value its entire inventory, how much higher or lower
would each of the following amounts have been?
a. For the year ended December 26, 2009:
a. Cost of goods sold.
b. Net income before taxes:
c. Income tax expense (provision for income taxes)
d. Net income:
e. Inventory on December 26, 2009:
b. For the life of the company as of December 26, 2009:
a. Cost of goods sold.
b. Cumulative net income before taxes:
c. Income tax expense
d. Retained earnings
3. During 2010, Snyders-Lance changed their method of accounting for the inventories previously
on the LIFO method to the FIFO method. U.S. GAAP requires that the company restate its
financial statements as if the company had always used FIFO for all years presented in the 2010
and later reports. Its explanation of the effects of the restatements is presented in its change in
accounting method note presented below.
The effect of the change on the Consolidated Statements of Income for the years ended December 26,
2009 and December 27, 2008 was as follows:
(in thousands, except share data)
Cost of sales
Income before interest and income taxes
Income tax expense
Net Income
Basic earnings per share
Diluted earnings per share
Increase/(Decrease)
2009
2008
$
1,128 $ (1,715)
(1,128)
1,715
(362)
593
(766)
1,122
(0.02)
0.03
(0.02)
0.03
The effect on the Consolidated Balance Sheet at December 26, 2009 was as follows:
(in thousands)
Inventories
Deferred income tax asset
Retained Earnings
Increase/
(Decrease)
$ 5,836
(2,013)
3,823
How do the numbers for 2009 reported in this note compare to your answers to requirement 2
above?
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b.
no effect
c.
decrease
decrease
no effect
decrease
no effect
2. What entry did Snyders-Lance make to record impairment of long-lived assets assuming
that all were fixed assets?
3. What was the effect of the impairment on the following financial statement values? Fill in
the amount and circle the direction.
a.
b.
decrease
no effect
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no effect
c.
decrease
decrease
no effect
15
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Debt/Equity Ratio
b.
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1. Assuming that they do no additional borrowing, what will Snyders-Lance most likely list as the
current portion of its long-term debt in its 2011 Annual Report?
2. Answer the following questions related to the Private placement senior notes with $100 million
due June 2017. Assume that they pay interest semiannually on June 30 and December 31.
a) Were these notes initially recorded at par, at a discount, or at a premium?
b) What was the effective market rate at the time the notes were issued?
c) What will be the exact carrying value of the notes at the end of 2012?
d) Assume further that as of December 31, 2012, the prevailing market rate for interest
obligations similar to Snyders-Lance's Notes due 2012 was 10%. What would be the
carrying value of the Notes at the end of 2012?
e) Now assume further that Snyders-Lance redeemed these Notes from their holder at market
value at the end of 2012. Which of the company's financial statements would be affected, in
what direction, and by how much? (Ignore taxes).
3. Answer the following questions related to the Secured bank loan due October 2015.
a) What is the face value (or principle amount owed) at the end of 2011?
b) How much principle was paid during 2011?
.
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Required: Answer the following questions based on Snyders-Lance's 2011 Annual Report.
1. What entry (entries) did Snyders-Lance make in 2011 related to their investment in Late
July Snacks LLC accounted for under the equity method?
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Fair Value
301.6
108.25
$
19.33
631,182
45,029
676,211
The transaction has been accounted for using the acquisition method of accounting which requires, among other things, the assets
acquired and liabilities assumed to be recognized at their fair values as of the merger date. Since the merger occurred close to our fiscal
year-end, the initial recording of the assets and liabilities was based on preliminary valuation assessments and is subject to change. The
following tables summarized the initial estimated fair values of assets acquired and liabilities assumed as part of the Merger:
Purchase Price
Allocation
$
96,336
48,192
40,463
15,144
117,061
283,267
373,500
15,471
989,434
(in thousands)
Cash and cash equivalents
Accounts receivable, net
Inventories
Other current assets
Fixed assets, net
Goodwill, net
Other intangible assets, net
Other noncurrent assets
Total assets acquired
Accounts payable
Other current liabilities
Current portion of long-term debt
Long-term debt
Deferred income tax liability
Other long-term liabilities
Total liabilities assumed
Less: Non-controlling interests assumed
Net assets acquired
16,100
34,360
7,806
116,661
125,616
8,672
309,215
4,008
676,211
Of the $373.5 million of acquired intangible assets, $265.4 million was assigned to the trade name and $50.6 million was assigned to
routes, neither of which are subject to amortization. The remaining acquired intangibles of $57.5 million were allocated to
customer related intangibles ,which are being amortized over the assets determinable useful life of 19 years. The goodwill from the
Merger is not deductible for income tax purposes.
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We incurred pre-tax Merger-related transaction and other costs in 2010 totaling $37.9 million, of which $2.4 million is included in Cost of
sales,
$35.2 million in Selling, general and administrative, $0.2 million in Other expense, net and $0.1 million in Interest expense, net. These
costs included incentive payments under the change in control provisions discussed in Note 4.
The following unaudited pro forma consolidated financial information has been prepared as if the Merger between Lance and Snyders had
taken place at the beginning of each fiscal year presented. The unaudited pro forma results include estimates and assumptions regarding
increased amortization of intangible assets related to the Merger, increased interest expense related to cash paid for Merger-related
expenses, and the related tax effects. The unaudited pro forma results for 2010 exclude $37.9 million of Merger-related transaction
and other costs described above. However, pro forma results are not necessarily indicative of the results that would have occurred if the
Merger had occurred on the date indicated, or that may result in the future.
(in thousands, except per share data)
Net sales and other operating revenue
Income before interest and income taxes
Net income attributable to Snyders-Lance, Inc.
Weighted average diluted shares
Diluted earnings per share
2010
1,585,208
87,574
49,409
65,863
0.75
2009
1,561,155
98,145
57,409
65,037
0.88
2009 Acquisition
On October 13, 2009, we completed the purchase of the Stella Doro brand and certain manufacturing equipment from Stella Doro
Biscuit Co., Inc. Stella Doro is a leading brand in the specialty cookie market. Stella Doro products include shelf stable cookies,
breakfast treats, breadsticks and biscotti that are sold in grocery stores and mass merchants throughout the United States, with
a high concentration in the Northeast and Southeast regions of the country. The Stella Doro brand enhances our portfolio of
niche snack food offerings to our customers. We manufacture the majority of the products in our Ashland, Ohio facility. We paid
approximately $23.9 million to acquire and install the Stella Doro assets, which was predominantly funded from borrowings from our
existing credit agreement. The purchase price allocation resulted in goodwill of approximately $5.7 million and identified other
intangible assets of $11.8 million. Of the $11.8 million of other identified intangible assets, $9.8 million was assigned to trademarks that
are not subject to amortization and $2.0 million was assigned to customer relationships with a useful life of 15 years. The post-acquisition
results of operations related to these assets are included in the 2009 and 2010 Consolidated Statements of Income.
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26,743 $
60,829 $ 180,145 $
10,793 $
2,512
- $ 278,510
19
700
3,611
27,209
649,002
4,008
(142,458)
3,665
2,531
700
3,611
6,842
676,211
4,008
(142,458)
3,665
(4,199)
(4,199)
144
(3,551)
(3,407)
1,214
11,888
13,102
25
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Snyders-Lance (A)
Required: Review the Snyders-Lance 2011 Annual Report. Look at the Income Statement,
Balance Sheet, and Cash Flow Statement closely and attempt to infer what kinds of information
they report. Then, answer the following questions based on the Report.
1. What types of products do they manufacture and sell?
Pretzels, sandwich crackers, kettle chips, cookies, potato chips, tortilla chips, other salty
snacks, sugar wafers, nuts, and restaurant style crackers (from Item 1: Business).
2. Did the management think that the company had a good year?
Lance, Inc. and Snyder merged in December of 2010. This dramatically increased net
income. However, the company is also undergoing significant changes including selling
off the company-owned distribution network. Management seems to believe that these
changes are for the better and that they are proceeding as planned.
The company did have lower gross margins as a percentage of revenue, but this is
partially due to severance costs. SG&A have been decreasing as a percent of revenue,
and gross revenue is increasing. (All material from Item 7, MD&A)
3. On what day of the year does their fiscal year end?
December 31
4. For how many years do they present complete:
a. Balance Sheets -- 2
b. Income Statements -- 3
c. Cash Flow Statements 3
5. Are their financial statements audited by independent CPAs? How did you know?
Yes Report of Independent Registered Public Accounting Firm (p. 55)
6. Did their total assets increase or decrease over the last year?
Increase
7. What was the ending balance of inventories?
$106 million
8. Write out their basic accounting equation in dollars at year-end.
A
=
L
+ SE
$1,466,790 = $628,199 + $838,591
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Snyders-Lance (B)
Required: Answer the following questions based on the Snyders-Lance 2011 Annual Report.
1. Between 2010 and 2011, did "Cost of Sales" increase at a faster or slower rate than "Net
Revenue?"
Cost of sales increased faster than Net revenue.
Cost of sales
Net revenue
$1,065,107$601,015
$601,015
$1,635,036$979,835
$979,835
= 77.22%
= 66.87%
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402
402
Income before income taxes decreased by $402 thousand. The adjusting entry did not affect
net cash provided by operating activities. Bad debt expense is a non-cash transaction.
2. Prepare a summary entry for the write-offs of bad debts during 2011. What was the effect of
this entry on Income before income taxes? What was the effect on Net cash provided by
operating activities?
Allowance for doubtful accounts (-XA, +A)
1,417
1,417
This entry does not affect income before income taxes. Bad debt expense is estimated in the
period in which the sale occurs (matching principle). When accounts are actually deemed
uncollectable they are written off.
The entry does not affect net cash provided by operating activities. This is a non-cash
transaction.
3. Did bad debt expense as a percentage of Net revenues increase or decrease between 2010 and
2011? Did management disclose any information indicating the reason for the increase or
decrease?
Decrease.
Bad debt expense in 2011:
Bad debt expense in 2010:
$402
$1,635,036
$2,649
$979,835
= 0.025%
= 0.27%
According to management, the majority of bad debt expense in 2010 was due to a customer
bankruptcy. (See MD&A and Item 7A)
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(in thousands)
Finished goods
Raw materials
Supplies, etc.
Total inventories at FIFO cost
Less: adjustment to reduce FIFO cost to LIFO cost
Total inventories
2008
23,227 $
11,556
15,293
50,076
(6,964)
$ 43,112 $
2007
21,910
7,701
14,297
43,908
(5,249)
38,659
If Snyders-Lance had used FIFO to value its entire inventory, how much higher or lower
would each of the following amounts have been?
a. For the year ended December 27, 2008:
a. Cost of goods sold:
Beg. Lifo End. Lifo = Difference in Cost
Reserve
Reserve
of Goods Sold
Note: this is in the
$5,249 $6,964
= $1,715 (lower)
normal direction.
b. Net income before taxes:
$1,715 higher
c. Income tax expense (provision for income taxes) (35% x $1,715): $600.25 higher
d. Net income: (65% x $1,715) = $1,114.75 higher
e. Inventory on December 27, 2008: $6,964 higher
b. For the life of the company as of December 27, 2008:
a. Cost of goods sold.
$0
$6,964
=
$6,964 ($6,964 lower)
b. Cumulative net income before taxes:
$6,964 higher
c. Income tax expense (35% x $5,836):
$2,437.4 higher
d. Retained earnings (65% x $5,836):
$4,526.6 higher
2. Its inventory note from the 2009 report is printed below:
NOTE 4. INVENTORIES
Inventories at December 26, 2009 and December 27, 2008 consisted of the following:
(in thousands)
Finished goods
Raw materials
Supplies, etc.
Total inventories at FIFO cost
Less: adjustments to reduce FIFO cost to LIFO cost
Total inventories
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2009
2008
33,060 $
23,227
11,732
11,556
19,081
15,293
63,873
50,076
(5,836)
(6,964)
$ 58,037 $
43,112
If Snyders-Lance had used FIFO to value its entire inventory, how much higher or lower
would each of the following amounts have been?
a. For the year ended December 26, 2009:
a. Cost of goods sold.
Beg. Lifo End. Lifo = Difference in Cost
Reserve
Reserve
of Goods Sold
Note: this is NOT in
$6,964
$5,836
=
$1,128 ($1,128 higher)
the normal direction.
b. Net income before taxes:
$1,128 lower
c. Income tax expense (provision for income taxes) (35% x $1,128): $394.8 lower
d. Net income: (65% x $1,128) =
$733.2 lower
e. Inventory on December 26, 2009:
$5,836 higher
b. For the life of the company as of December 26, 2009:
a. Cost of goods sold.
Beg. Lifo End. Lifo = Difference in Cost
Reserve
Reserve
of Goods Sold
$0
$5,836
=
$5,836 ($5,836 lower)
b. Cumulative net income before taxes:
$5,836 higher
c. Income tax expense (35% x $5,836):
$2,042.6 higher
d. Retained earnings (65% x $5,836):
$3,793.4 higher
3. During 2010, Snyders-Lance changed their method of accounting for the inventories previously
on the LIFO method to the FIFO method. U.S. GAAP requires that the company restate its
financial statements as if the company had always used FIFO for all years presented in the 2010
and later reports. Its explanation of the effects of the restatements is presented in its change in
accounting method note presented below.
The effect of the change on the Consolidated Statements of Income for the years ended December 26,
2009 and December 27, 2008 was as follows:
(in thousands, except share data)
Cost of sales
Income before interest and income taxes
Income tax expense
Net Income
Basic earnings per share
Diluted earnings per share
Increase/(Decrease)
2009
2008
$
1,128 $ (1,715)
(1,128)
1,715
(362)
593
(766)
1,122
(0.02)
0.03
(0.02)
0.03
The effect on the Consolidated Balance Sheet at December 26, 2009 was as follows:
(in thousands)
Inventories
Deferred income tax asset
Retained Earnings
Increase/
(Decrease)
$ 5,836
(2,013)
3,823
How do the numbers for 2009 reported in this note compare to your answers to requirement 2
above?
The numbers are quite similar to those from requirement 2. The actual effect on cost of sales
was the same as the calculated effect. The lower income taxes reflects that fact that SnydersLance has a marginal tax rate of less than 35%. Their marginal tax rate in 2009 was actually
$
$ ,
32.1%. Over the life of the company the tax rate is
34.5%.
$ ,
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$ ,
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b.
c.
12,704
12,704
3. What was the effect of the impairment on the following financial statement values? Fill in
the amount and circle the direction.
a.
b.
c.
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Payment
2012
2013
2014
2015
2016
Thereafter
$15.9
13.6
10.4
7.1
4.2
8.4
PV
Factor
(n, i)
1, 10
2, 10
3, 10
4, 10
5, 10
7, 10
Present
Value
$14.4
11.2
7.8
4.8
2.6
4.3
45.2
2. If these leases were constructively capitalized (treated as capital leases), how would the
following ratios and financial statement amounts be affected? (increase, decrease,
unaffected)
a.
Debt/Equity Ratio
Increase because of the increase in debt
b.
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3. Answer the following questions related to the Secured bank loan due October 2015.
a) What is the face value (or principle amount owed) at the end of 2011?
$4,416 (this is variable rate debt so its face value and book value are equal)
b) How much principle was paid during 2011?
5,441 4,416 = $1,025
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Required: Answer the following questions based on Snyders-Lance's 2011 Annual Report.
1. What entry (entries) did Snyders-Lance make in 2011 related to their investment in Late
July Snacks LLC accounted for under the equity method?
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100.0
100.0
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27,209
649,002
43
b) What amount of the net assets acquired will not be subject to amortization for book
purposes?
Goodwill
Trade name
Routes
Total
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283,267
265,400
50,600
599,267
44
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NAME ___________________________
Instructions:
This open book examination consists of two problems. Both are required. The problems can be
worked in any order. Please show all calculations. Record your answers on the exam in the space
provided. You may use whatever books, notes and calculators you wish.
You may want to separate the pages while you work. Please restaple them in the correct order when
you return the examination. A stapler will be available. There are 13 pages to this exam including
the cover.
Please read and sign the following statement:
Academic integrity is expected of all students of Cornell University at all times,
whether in the presence or absence of members of the faculty.
Understanding this, I declare I shall not give, use or receive unauthorized aid in this
examination.
______________________________
Signature
Points
Assigned
Suggested
Times
Problem I Gannett
80
60 minutes
Problem II Ford
20
15 minutes
100
75 minutes
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2)
Non-cash purchases of property Plant and Equipment amounted to $49,533 during 1993.
What was the net book value of Property Plant and Equipment which was sold during 1993?
(Assume that all other purchases of new property plant and equipment and sales of old
property plant and equipment were for cash.)?
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3) (a) Assume that all of Gannetts sales to customers are on account. Its 10-K indicates that
$19,304 bad (trade) accounts receivable were written-off in 1993 and there were no
reinstatements. Bad debt expense for the period were recorded by debiting "Selling, General
and Administrative" and crediting the "Allowance for doubtful accounts." What amount of
bad debt expense was recorded in 1993?
(b) Assuming all sales revenues were on account, what were collections on (trade) accounts
receivable during the 1993?
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4)
Assume that Gannett failed to record the expiration of prepaid rent of $700 for office
buildings during the last month of the fiscal year.
(a) Compute the amount that should have been reported as Income before income taxes for 1993.
(b) Compute the amount that should have been reported as Total assets at the end of 1993.
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5) Assuming that Gannett makes adjusting entries at the end of each month and that all accrued
compensation is paid within 2 weeks of month end. What entry did Gannett make for accrued
compensation at the end of the year 1993?
6) What were the proceeds from long-term debt issued during 1993?
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7) Complete the "Operating Activities" section of the Statement of Cash Flows for the year ended
December 26, 1993 using the indirect method. Assume that depreciation expense was Gannetts
only "revenue and expense that does not affect operating assets or liabilities."
Cash Flow from Operating Activities
Net Income
___________
Cash provided by operating activities
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8)
Assuming that Gannett had done each of the following in preparation of its 1993 statements,
and no adjustments to correct any errors were made, what would be the effect of each on a)
Current liabilities on December 26, 1993, b) Net income for 1993, c) Cash flow from
operations for 1993, and d) Retained earnings on December 26, 1993? Circle U/S for
understate, O/S for overstate, or NE for no effect. Treat each item independently and ignore
income taxes.
a)
a) Current liabilities
on Dec. 31, 1993
U/S O/S NE
b) Net income
for 1993
U/S O/S NE
c) Cash flow
from operations
for 1993
U/S O/S NE
b)
On the last day of the year, a $2,000 prepayment of insurance (for 1994) was recorded
using the following entry:
Accrued liabilities - other
Cash
200
200
a) Current liabilities
on Dec. 31, 1993
U/S O/S NE
b) Net income
for 1993
U/S O/S NE
c) Cash flow
from operations
for 1993
U/S O/S NE
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1.
Determine the ending inventory that would have been reported in the current year if Ford had
used only FIFO.
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2.
The cost of goods sold reported by Ford for the current year was $74,315 million. Determine the
cost of goods sold that would have been reported if Ford had used only FIFO for both years.
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Problem 1
1
RE
2,158,583 beginning bal.
190,089 397,752 net income
2,366,246 ending bal.
divs. decl.*
2
PPE (net)
beginning bal. 1,475,291
cash purch
132,122 164,420 depr. exp.
non-cash purch
49,533
14,257 disposals*
ending bal.
1,478,269
3a
writeoffs
3b
beginning bal.
sales
ending bal.
4a
19,304 writeoffs
3,641,621 3,602,873 collections*
462,978
4b Total assets
less expired prepaid rent
5 Compensation expense
53,922
Accrued compensation liab.
6
668,452
-700
667,752
3,823,798
-700
3,823,098
Summer 1995
7 Net income
Depr exp
A/R
Other rec.
Inventories
Prepaid expenses
A/P
Accrued liabs
Income tax pay
Deferred income
Def. income taxes
Post-retire. Medical
Cash flow from ops.
53,922
61
100
d) O/S
2,000
c) O/S
Problem 2
1
Lifo ending inventory
Difference
Fifo ending inventory
Robert Libby
BI + P - EI = CGS
CGS LIFO
+change in Beg inv
-change in End inv
CGS FIFO
200
1,800
d) NE
6,816.8
1,235.0
8,051.8
74,315.0
1,246.0
(1,235.0)
74,326.0
Robert Libby
62
Other Cases
Intel (A)
Dennys
Cash Flow (B)
Intel (B)
Cash Flow (C)
Honda Motor
Kimberly-Clark (A)
Nabors Industries
Kimberly-Clark (B)
63
ROBERT LIBBY
Robert Libby
64
Intel (A)
According to their annual report, Intel is the worlds largest semiconductor chip maker,
supplying advanced technology solutions for the computing and communications industries. Its
comparative balance sheet and income statement and property, plant, and equipment note are
shown on pages that follow. All numbers in the case and statements are in millions Treat each
item independently. Watch the dates on the statements.
1)
Intel reports on its cash flow statement that it purchased $5,207 of Property, Plant and
Equipment during 2010. What was the original cost of Property Plant and Equipment
sold (disposed of) during 2010?
2)
Intel reports Depreciation Expense of $4,398 on its 2010 cash flow statement. What was
the Accumulated Depreciation on the Property Plant and Equipment sold (disposed of)
during 2010?
Robert Libby
65
3)
Are Intel's Property, Plant, and Equipment more or less than half way through their
useful lives on average? How did you know?
4)
Compute the cash collected from customers during 2010. State the assumptions you
found necessary in performing the computation.
Robert Libby
66
5)
Assume that the company had done each of the following in preparation of its statements
for the year ended December 25, 2010, and no adjustments were made. What would be
the effect of each event on the following amounts? Circle US for understate, OS for
overstate, or NE for no effect. Treat each item independently and ignore income tax
effects.
a)
b)
Robert Libby
The company failed to record receipt of $10 payment on account from a customer.
No adjustment was made.
a) Total liabilities
at year end
US OS NE
US OS NE
c) Total assets
US OS NE
d) Shareholders equity
at year end
US OS NE
US OS NE
US OS NE
c) Total assets
US OS NE
d) Shareholders equity
at year end
US OS NE
67
c)
Robert Libby
Insurance of $60 was prepaid on December 1, 2010 for the six months beginning
December 1 and recorded as "Insurance expense." No adjustment was made.
a) Total liabilities
at year end
US OS NE
US OS NE
c) Total assets
US OS NE
d) Shareholders equity
at year end
US OS NE
68
INTEL CORPORATION
CONSOLIDATED BALANCE SHEETS
December 25, 2010 and December 26, 2009
2010
2009
(In MillionsExcept Par Value)
Assets
Current assets:
Cash and cash equivalents
$ 5,498 $ 3,987
Short-term investments
11,294
5,285
Trading assets
5,093
4,648
Accounts receivable, net of allowance for doubtful accounts of $36 ($28 in
2010)
2,867
2,273
Inventories
3,757
2,935
Deferred tax assets
1,488
1,216
Other current assets
1,614
816
Total current assets
31,611 21,157
Property, plant and equipment, net
17,899 17,225
Marketable equity securities
1,008
773
Other long-term investments
3,026
4,179
Goodwill
4,531
4,421
Identified intangible assets, net
5,111
5,340
Total assets
$63,186 $53,095
Liabilities and stockholders equity
Current liabilities:
Short-term debt
$
38 $ 172
Accounts payable
2,290
1,883
Accrued compensation and benefits
2,888
2,448
Accrued advertising
1,007
773
Deferred income
622
593
Other accrued liabilities
2,482
1,722
Total current liabilities
9,327
7,591
Long-term income taxes payable
190
193
Long-term debt
2,077
2,049
Long-term deferred tax liabilities
926
555
Other long-term liabilities
1,236
1,003
Commitments and contingencies (Notes 23 and 29)
Stockholders Equity
Preferred stock, $0.001 par value, 50 shares authorized; none issued
Common stock, $0.001 par value, 10,000 shares authorized; 5,000 issued and
outstanding (5,581 issued and 5,551 outstanding in 2010) and capital in
excess of par value
16,178 14,993
Accumulated other comprehensive income (loss)
333
393
Retained earnings
32,919 26,318
Total stockholders equity
49,430 41,704
Robert Libby
69
$63,186 $53,095
INTEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Years Ended December 25, 2010
(In MillionsExcept Per Share Amounts)
Net revenue
Cost of sales
Gross margin
Research and development
Marketing, general and administrative
Restructuring and asset impairment charges
Amortization of acquisition-related intangibles
Operating expenses
Operating income
Gains (losses) on equity method investments, net
Gains (losses) on other equity investments, net
Interest and other, net
Income before taxes
Provision for taxes
Net income
Basic earnings per common share
Diluted earnings per common share
Weighted average common shares outstanding: Basic
Weighted average common shares outstanding: Diluted
2010
$ 43,623
15,132
28,491
6,576
6,309
18
12,903
15,588
348
231
109
16,045
4,581
$ 11,464
$ 2.06
$ 2.01
5,555
5,696
2009
$ 35,127
15,566
19,561
5,653
7,931
231
35
13,850
5,711
(147)
(23)
163
5,704
1,335
$ 4,369
$ 0.79
$ 0.77
5,557
5,645
2008
$ 37,586
16,742
20,844
5,722
5,452
710
6
11,890
8,954
(170)
(376)
488
7,686
2,394
$ 5,292
$ 0.93
$ 0.92
5,663
5,748
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property, Plant and Equipment
Property, plant and equipment, net at fiscal year-ends was as follows:
(In Millions)
Land and buildings
Machinery and equipment
Construction in progress
Total property, plant and equipment, gross
Less accumulated depreciation
Total property, plant and equipment, net
Robert Libby
70
2010
$ 17,421
30,421
2,639
50,481
(32,582)
$ 17,899
2009
$ 16,687
28,339
2,796
47,822
(30,597)
$ 17,225
Solution
Intel (A)
According to their annual report, Intel is the worlds largest semiconductor chip maker,
supplying advanced technology solutions for the computing and communications industries. Its
comparative balance sheet and income statement and property, plant, and equipment note are
shown on pages that follow. All numbers in the case and statements are in millions Treat each
item independently. Watch the dates on the statements.
1)
Intel reports on its cash flow statement that it purchased $5,207 of Property, Plant and
Equipment during 2010. What was the original cost of Property Plant and Equipment
sold (disposed of) during 2010?
Beg
Purchases
End
2)
P&E (Gross)
47,822
5,207
2,548 Disposals
50,481
Intel reports Depreciation Expense of $4,398 on its 2010 cash flow statement. What was
the Accumulated Depreciation on the Property Plant and Equipment sold (disposed of)
during 2010?
Disposals
3)
Are Intel's Property, Plant, and Equipment more or less than half way through their
useful lives on average? How did you know?
Robert Libby
71
4)
Compute the cash collected from customers during 2010. Ignore bad debts (see chapter
6). State the assumptions you found necessary in performing the computation.
Beg
Sales
End
5)
Assume that the company had done each of the following in preparation of its statements
for the year ended December 25, 2010, and no adjustments were made. What would be
the effect of each event on the following amounts? Circle US for understate, OS for
overstate, or NE for no effect. Treat each item independently and ignore income tax
effects.
a)
DONE
Nothing
SHOULD BE:
Cash (A)
Accounts Receivable (A)
CORRECTION
Cash (A)
Accounts Receivable (A)
a) Total liabilities
at year end
US OS NE
US OS NE
c) Total assets
US OS NE
d) Shareholders equity
at year end
US OS NE
Robert Libby
72
b)
DONE
Nothing
SHOULD BE:
Accrued Interest Rec. (A)
Interest Revenue (R)
CORRECTION
Accrued Interest Rec. (A)
Interest Revenue (R)
a) Total liabilities
at year end
US OS NE
US OS NE
c) Total assets
US OS NE
d) Shareholders equity
at year end
US OS NE
c)
Insurance of $60 was prepaid on December 1, 2010 for the six months beginning
December 1 and recorded as "Insurance expense." No adjustment was made.
DONE
Insurance expense (E) 60
Cash (A)
60
SHOULD BE:
Insurance expense (E) 10
Prepaid insurance (A) 50
Cash (A)
60
CORRECTION
Prepaid insurance. (A) 50
Insurance expense (E)
50
a) Total liabilities
at year end
US OS NE
US OS NE
c) Total assets
US OS NE
d) Shareholders equity
at year end
US OS NE
Robert Libby
73
Robert Libby
74
Dennys Case
This assignment includes a total of 8 pages.
Dennys Corporation develops, operates and franchises 1,658 family restaurants located throughout
the United States. Their 2009 and 2010 Balance Sheets, 2008, 2009, and 2010 Statements of
Income, a partial Statement of Cash Flows for 2010, and selected notes are presented on the
following pages. Treat each item independently and ignore tax effects. All numbers in the
statements and problem are in Thousands (000s). Watch the dates on the statements.
Required:
Complete the following in the space provided.
1)
What was the net book value of property, net sold during 2010.
2)
No stock was retired during 2010. What entry did the company make for issuance of
common stock during 2010?
Robert Libby
75
3)
Assume the only revenues and expenses that did not affect operating assets or liabilities were
Depreciation and amortization expense and Share-based compensation of $2,840. Assume
that Other current liabilities are all related to operating activities. Liabilities for insurance
claims are payable to employees and customers.
Prepare the "Operating Activities" section of the Statement of Cash Flows for the year ended
December 29, 2010 using the indirect method.
4)
Dennys paid $268,769 of principal on long-term debt and $25,277 of interest during 2010.
Dennys also took out a $246,250 long-term cash loan. Assuming that there were no other
financing activities during 2010, prepare the Financing Activities section of the Cash Flow
Statement for 2010.
Robert Libby
76
5) Assume that Dennys sold $100 in gift certificates to customers and recorded them as
Restaurant sales revenue.
(a) Compute the amount that should have been reported as Total Liabilities at year-end 2010.
(b) Compute the amount that should have been reported as Net Income before Income Taxes for
2010.
6) (a) Assume that no advertising expenses are prepaid. Which was higher during 2010 (check
one)?
Advertising expense __________
Advertising paid __________
(b) How did you know?
Robert Libby
77
7)
Assuming that Dennys had done each of the following in preparation of its 2010 statements,
and no adjustments to correct any errors were made, what would be the effect of each on a)
Current assets on December 29, 2010, b) Net income for 2010, c) Cash flow from operations
for 2010, and d) Shareholders equity on December 29, 2010? Circle U/S for understate, O/S
for overstate, or NE for no effect. Treat each item independently and ignore income taxes.
a)
b)
Robert Libby
The company failed to record depreciation of $2,000 on an office building for 2010.
No subsequent adjustment was made.
a) Current assets
on Dec. 29, 2010
U/S O/S NE
b) Net income
for 2010
U/S O/S NE
c) Cash flow
from operations
for 2010
U/S O/S NE
d) Shareholders equity
on Dec. 29, 2010
U/S O/S NE
Assume that Accrued salaries was properly recorded at the end of 2009. When
Dennys paid the Accrued salaries at the beginning of 2010, they made the
following entry. No subsequent adjustment was made.
Compensation Expense (E)
Cash (A)
a) Current assets
on Dec. 29, 2010
U/S O/S NE
b) Net income
for 2010
U/S O/S NE
c) Cash flow
from operations
for 2010
U/S O/S NE
d) Shareholders equity
on Dec. 29, 2010
U/S O/S NE
78
Robert Libby
79
29,074
17,280
4,037
1,933
10,162
62,486
26,525
18,106
4,165
9,549
58,345
129,518
131,484
Other Assets:
Goodwill
Intangible assets, net
Other noncurrent assets
Total Assets
31,308
52,054
35,840
311,206
32,440
55,110
35,248
312,627
Liabilities
Current Liabilities:
Current maturities of notes and debentures
Current maturities of capital lease obligations to finance company
Accounts payable
Other current liabilities
Total Current Liabilities
Long-Term Liabilities:
Notes and debentures, less current maturities, net of discount of $3,455 and $0, respectively
Capital lease obligations to finance company, less current maturities
Liability for insurance claims, less current portion
Deferred income taxes
Other noncurrent liabilities and deferred credits
Total Long-Term Liabilities
Total Liabilities
2,583
4,109
25,957
57,685
90,334
900
3,725
22,842
64,641
92,108
234,143
18,988
18,810
13,339
39,304
324,584
414,918
254,357
19,684
21,687
13,016
39,273
348,017
440,125
1,001
548,490
(630,114)
(19,199)
(99,822)
(3,890)
(103,712)
311,206
966
542,576
(652,827)
(18,213)
(127,498)
(127,498)
312,627
Robert Libby
80
Robert Libby
81
December 29,
2010
December 31
2008
1,953
908
1,011
Robert Libby
82
Solution
Dennys Case Solution
This assignment includes a total of 8 pages.
Dennys Restaurant Group, Inc. develops, operates and franchises 341 family restaurants located in
the south and midwest. Their 2009 and 2010 Balance Sheets, 2008, 2009, and 2010 Statements of
Income, a partial Statement of Cash Flows for 2010, and selected notes are presented on the
following pages. Treat each item independently and ignore tax effects. All numbers in the
statements and problem are in Thousands (000s). Watch the dates on the statements.
Required:
Complete the following in the space provided.
1)
What was the net book value of property, net sold during 2010.
2)
No stock was retired during 2010. What entry did the company make for issuance of
common stock during 2010?
Cash (+A)
5,949
Common Stock (+SE) (1,001 - 966)
35
Paid-in Capital (+SE) (548,490 - 542,576)
5,914
Robert Libby
83
3)
Assume the only revenues and expenses that did not affect operating assets or liabilities were
Depreciation and amortization expense and Share-based compensation of $2,840. Assume
that Other current liabilities are all related to operating activities. Liabilities for insurance
claims are payable to employees and customers.
Prepare the "Operating Activities" section of the Statement of Cash Flows for the year ended
December 29, 2010 using the indirect method.
Cash Flow from Operating Activities
Net income
Depreciation and Amortization
Share-based compensation
Receivables
Inventories
Prepaid and other current assets
A/P
Other current liabilities
Liab. for insurance claims less curr.
Deferred income taxes
Cash flow from ops.
4)
22,713
29,637
2,840
826
128
(613)
3,115
(6,956)
(2,877)
323
49,136
Dennys paid $268,769 of principal on long-term debt and $25,277 of interest during 2010.
Dennys also took out a $246,250 long-term cash loan. Assuming that there were no other
financing activities during 2010, prepare the Financing Activities section of the Cash Flow
Statement for 2010.
Robert Libby
84
(268,769)
246,250
(22,519)
5) Assume that Dennys sold $100 in gift certificates to customers and recorded them as
Restaurant sales revenue.
(a) Compute the amount that should have been reported as Total Liabilities at year-end 2010.
100
100
414,918
100
415,018
(b) Compute the amount that should have been reported as Net income before income taxes for
2010.
b. Reported
less:
Revised
24,094
100
23,994
6) (a) Assume that no advertising expenses are prepaid. Which was higher during 2010 (check
one)?
Advertising expense __ x________
Advertising paid __________
(b) How did you know?
Robert Libby
85
7)
Assuming that Dennys had done each of the following in preparation of its 2010 statements,
and no adjustments to correct any errors were made, what would be the effect of each on a)
Current assets on December 29, 2010, b) Net income for 2010, c) Cash flow from operations
for 2010, and d) Shareholders equity on December 29, 2010? Circle U/S for understate, O/S
for overstate, or NE for no effect. Treat each item independently and ignore income taxes.
a)
The company failed to record depreciation of $2,000 on an office building for 2010.
No subsequent adjustment was made.
a) Current assets
on Dec. 29, 2010
U/S O/S NE
b) Net income
for 2010
U/S O/S NE
c) Cash flow
from operations
for 2010
U/S O/S NE
d) Shareholders equity
on Dec. 29, 2010
U/S O/S NE
2,000
d) O/S
Assume that Accrued salaries was properly recorded at the end of 2009. When
Dennys paid the Accrued salaries at the beginning of 2010, they made the
following entry. No subsequent adjustment was made.
Compensation Expense (+E,-SE)
Cash (-A)
a) Current assets
on Dec. 29, 2010
U/S O/S NE
b) Net income
for 2010
U/S O/S NE
c) Cash flow
from operations
for 2010
U/S O/S NE
d) Shareholders equity
on Dec. 29, 2010
U/S O/S NE
3b Accrued Salaries(-L)
Compensation Expense(-E,+SE)
a) NE
Robert Libby
b) U/S
86
c) NE
d) U/S
A simplified statement of cash flows reflecting the "indirect method" is presented below. Each
of the 10 lines is numbered and the direction of its effect on cash is indicated. Assume that a
cash flow statement has been completed except for the impact of each of the listed transactions.
For each of the listed January transactions, indicate which line(s) are affected by the recording
each of the transactions, the amount, and in the case of line (1) and 11, the direction of the effect
on the Statement of Cash Flows for the month of January. The best approach to this problem is
to complete the journal entry for each transaction and then determine which lines are affected.
Remember that line 11 is affected only if you see "Cash" in the transaction. The solution for the
first transaction is completed as an illustration.
Operations:
Net Income
(1)
Add Expenses and Losses not affecting Operating Assets & Liabilities
+(2)
Subtract Revenues and Gains not affecting Operating Assets & Liabilities
-(3)
Add Net Decreases in Operating Assets other than cash and Increases
in Operating Liabilities
+(4)
Subtract Net Increases in Operating Assets other than cash and Decreases
in Operating Liabilities
-(5)
Cash Flow From Operations
Subtotal
Investing:
Acquisition of property, plant, and equipment
and investments for cash
Cash proceeds from disposal of property, plant,
and equipment and investments
Cash Flow From Investing
+(7)
Subtotal
Financing:
Dividends paid
Cash proceeds from issuance of debt or stock
Cash paid to retire debt or stock
Cash Flow From Financing
-(8)
+(9)
-(10)
Subtotal
-(6)
(11)
a. Collected $40,000 from the organizers of the company and issued shares of common stock.
a.
Cash
+(11) 40,000
Common Stock
+(9) 40,000
b. Paid $6,000 for three months rent in advance for a warehouse building.
Robert Libby
87
c. Used but was not billed for $1,000 worth of electricity during the month of January.
e. Borrowed $10,000 cash from the bank due in 90 days with interest of 12%.
i. Received a computer system from an investor in exchange for issuing $6,000 worth of
additional capital stock.
j. $1,000 worth of inventory and a $500 store fixture are destroyed by water leaking from the
roof. Both losses are uninsured.
k. A store fixture originally costing $500 is sold to another company for $500 cash. (Ignore
depreciation.)
n. Paid the store clerks wages of $4,000 through January 27. In addition, the clerks have earned
$500 which will be paid in February.
Robert Libby
88
A simplified statement of cash flows reflecting the "indirect method" is presented below. Each
of the 10 lines is numbered and the direction of its effect on cash is indicated. Assume that a
cash flow statement has been completed except for the impact of each of the listed transactions.
For each of the listed January transactions, indicate which line(s) are affected by the recording
each of the transactions, the amount, and in the case of line (1) and 11, the direction of the effect
on the Statement of Cash Flows for the month of January. The best approach to this problem is
to complete the journal entry for each transaction and then determine which lines are affected.
Remember that line 11 is affected only if you see "Cash" in the transaction.
Operations:
Net Income
(1)
Add Expenses and Losses not affecting Operating Assets & Liabilities
+(2)
Subtract Revenues and Gains not affecting Operating Assets & Liabilities
-(3)
Add Net Decreases in Operating Assets other than cash and Increases
in Operating Liabilities
+(4)
Subtract Net Increases in Operating Assets other than cash and Decreases
in Operating Liabilities
-(5)
Cash Flow From Operations
Subtotal
Investing:
Acquisition of property, plant, and equipment
and investments for cash
Cash proceeds from disposal of property, plant,
and equipment and investments
Cash Flow From Investing
+(7)
Subtotal
Financing:
Dividends paid
Cash proceeds from issuance of debt or stock
Cash paid to retire debt or stock
Cash Flow From Financing
-(8)
+(9)
-(10)
Subtotal
-(6)
(11)
a. Collected $40,000 from the organizers of the company and issued shares of common stock.
a.
Cash
+(11) 40,000
Common Stock
Robert Libby
+(9) 40,000
89
b. Paid $6,000 for three months rent in advance for a warehouse building.
b.
Prepaid Rent
Cash
-(5) 6,000
-(11) 6,000
-ORRent Expense
Cash
-(1) 6,000
-(11) 6,000
c. Used but was not billed for $1,000 worth of electricity during the month of January.
c.
Utilities Expense
Utilities Payable
-(1) 1,000
+(4) 1,000
Store Fixtures
Cash
-(6) 12,000
-(11) 12,000
e. Borrowed $10,000 cash from the bank due in 90 days with interest of 12%.
e.
Cash
+(11) 10,000
Notes Payable
+(9) 10,000
Inventory
-(5) 15,000
Accounts Payable
+(4) 15,000
Inventory
-(5) 3,000
Cash
-(11) 3,000
Cash
Accounts Receivable
Sales
+(11) 4,000
-(5) 11,000
+ (1) 15,000
i. Received a computer system from an investor in exchange for issuing $6,000 worth of
additional capital stock.
i
Equipment
Common Stock
6,000
6,000
No effect on any of the line items. This is a non-cash investing and financing activity to be
reported as a supplement at the end of the Statement of Cash Flows.
j. $1,000 worth of inventory and a $500 store fixture are destroyed by water leaking from the
roof. Both losses are uninsured.
j.
Robert Libby
-(1) 1,500
+(4) 1,000
+(2) 500
90
k. A store fixture originally costing $500 is sold to another company for $500 cash. (Ignore
depreciation.)
k.
Cash
+(11) 500
Store Fixtures
+(7) 500
Depreciation Expense
-(1) 200
Accumulated Depreciation
+(2) 200
Recording depreciation expense affects two line items: it reduces net income -(1) and it is
added back +(2) to produce no net effect (except for taxes) on cash flows from operations.
Accounts Payable
Cash
-(5) 5,000
-(11) 5,000
n. Paid the store clerks wages of $4,000 through January 27. In addition, the clerks have earned
$500 which will be paid in February.
n.
Salaries Expense
Salaries Payable
Cash
Robert Libby
-(1) 4,500
+ (4) 500
-(11) 4,000
91
Robert Libby
92
Intel (B)
Assume that the company had done each of the following in preparation of its statements for
the year ended December 31, 2011, and no adjustments were made. What would be the effect
of each event on the following amounts? Circle US for understate, OS for overstate, or NE
for no effect. Treat each item independently and ignore income tax effects.
a)
b)
c)
Robert Libby
US OS NE
US OS NE
US OS NE
US OS NE
Insurance of $60 was prepaid on December 1, 2011 for the six months
beginning December 1 and recorded as "Insurance expense." No adjustment
was made.
a) Income before income
taxes for the year
US OS NE
US OS NE
93
Robert Libby
94
Solution
Intel (B)
Assume that the company had done each of the following in preparation of its statements for
the year ended December 31, 2011, and no adjustments were made. What would be the effect
of each event on the following amounts? Circle US for understate, OS for overstate, or NE
for no effect. Treat each item independently and ignore income tax effects.
a)
DONE
Nothing
SHOULD BE:
Cash (+A)
Accounts Receivable (-A)
CORRECTION
Cash (+A)
Accounts Receivable (-A)
US OS NE
US OS NE
NE; US
b)
DONE
Nothing
SHOULD BE:
Accrued Interest Rec. (+A)
Interest Revenue (+R,+SE)
CORRECTION
Accrued Interest Rec. (+A)
Interest Revenue (+R,+SE)
US OS NE
US OS NE
US; NE
c)
Insurance of $60 was prepaid on December 1, 2011 for the six months
beginning December 1 and recorded as "Insurance expense." No adjustment
was made.
DONE
Insurance expense (+E,-SE) 60
Cash (-A)
60
SHOULD BE:
Insurance expense (+E,-SE) 10
Prepaid insurance (+A)
50
Cash (-A)
60
CORRECTION
Prepaid insurance. (+A) 50
Insurance expense (-E,+SE) 50
US OS NE
US OS NE
US; NE
Robert
Libby in accruals and deferrals do
95 not affect cash flow from operations!
NOTE:
Errors
Robert Libby
96
A simplified statement of cash flows reflecting the "indirect method" is presented in "Cash Flow
(B)" respectively. Each of the 10 lines is numbered and the direction of its effect on cash is
indicated. For each of the listed January transactions, indicate which line(s) are affected by the
recording of the transaction, the amount, and in the case of line 11, the direction of the effect on
the Statement of Cash Flows for the month of January for the indirect method.
a. Accounts receivable in the amount of $4,000 are written off. The company uses the
allowance method of accounting for bad debts.
b. At the end of January, an entry is made to increase the allowance for uncollectible accounts
by $5,000. The company uses the allowance method of accounting for bad debts.
c. On January 30, the company records $600 in accrued interest income on a note receivable
from a customer.
Robert Libby
97
Robert Libby
98
Solution
Cash Flow (C)
A simplified statement of cash flows reflecting the "indirect method" is presented in "Cash Flow
(B)" respectively. Each of the 10 lines is numbered and the direction of its effect on cash is
indicated. For each of the listed January transactions, indicate which line(s) are affected by the
recording of the transaction, the amount, and in the case of line 11, the direction of the effect on
the Statement of Cash Flows for the month of January for the indirect method.
a. Accounts receivable in the amount of $4,000 are written off. The company uses the
allowance method of accounting for bad debts.
A. Indirect - None.
Allowance for Doubtful Accounts (XCA)
A/R (CA)
4,000
4,000
b. At the end of January, an entry is made to increase the allowance for uncollectible accounts
by $5,000.The company uses the allowance method of accounting for bad debts.
B. Indirect -(1) 5,000; +(4) 5,000.
Bad debt expense (E)
Allowance for Doubtful Accounts (XCA)
5,000
5,000
c. On January 30, the company records $600 in accrued interest income on a note receivable
from a customer.
C. Indirect +(1) 600; -(5) 600.
Interest Receivable (CA)
Interest Revenue (OE-R)
Robert Libby
600
600
99
Robert Libby
100
(billions)
2010
2011
8,579 Y 8,937
6,415
6,497
1,337
1,383
463
488
(5) Inventories
Inventories at March 31, 2010 and 2011 are summarized as follows:
Yen (billions)
2010
2011
Finished goods
Y 560
Y 531
Work in process
36
50
Raw materials
340
319
Total
936
900
Required:
1. Compute the total additions or costs added to inventory during the year ended March 31, 2011.
2. Compute the transfers of Work-in-process to Finished goods during year ended March 31, 2011.
Robert Libby
101
3. Assume that the company had done each of the following in preparation of its statements for the
year ended March 31, 2011, and no adjustments were made. What would be the effect of each
event on the following amounts? Circle U/S for understate, O/S for overstate, or NE for no effect.
Treat each item independently and ignore income tax effects.
a. Direct factory wages of 10 related to goods which had been completed but were still in
inventory were earned and not paid for in March, but no related entry(s) were made. No
adjustment was made.
a) Cash flow from
operations for the year
U/S O/S NE
U/S O/S NE
c) Current assets
at year end
U/S O/S NE
d) Shareholders equity
at year end
U/S O/S NE
b. Depreciation of factory equipment for 200 was not recorded. The related goods were sold
in March. No adjustment was made.
Robert Libby
U/S O/S NE
U/S O/S NE
c) Non-current assets
at year end
U/S O/S NE
d) Shareholders equity
at year end
U/S O/S NE
102
Solution
Honda Motor Case
Honda Motor Company is the worlds largest manufacturer of motorcycles and a leading manufacturer of
automobiles. Excerpts from its income statement and its inventory footnote provided below.
Consolidated Statements of Income
Years ended March 31, 2009, 2010 and 2011
Yen
2009
Net sales and other operating revenue (notes 2&6) Y 10,011 Y
Cost of sales (notes 1(u)&2)
7,420
Selling, general and administrative (note 1(u))
1,839
Research and development
563
(billions)
2010
2011
8,579 Y 8,937
6,415
6,497
1,337
1,383
463
488
(5) Inventories
Inventories at March 31, 2010 and 2011 are summarized as follows:
Yen (billions)
2010
2011
Finished goods
Y 560
Y 531
Work in process
36
50
Raw materials
340
319
Total
936
900
Required:
1. Compute the total additions or costs added to inventory during the year ended March 31, 2011.
Beginning
Additions
Ending
Inventory
936
6,461
6,497 Cost of good sold
900
2. Compute the transfers of Work-in-process to Finished goods during year ended March 31, 2011.
Robert Libby
103
3. Assume that the company had done each of the following in preparation of its statements for the
year ended March 31, 2011, and no adjustments were made. What would be the effect of each
event on the following amounts? Circle US for understate, OS for overstate, or NE for no effect.
Treat each item independently and ignore income tax effects.
a. Direct factory wages of 10 related to goods which had been completed but were still in
inventory were earned and not paid for in March, but no related entry(s) were made. No
adjustment was made.
a) Cash flow from
US OS NE
DONE
operations for the year
Nothing
b) Income before income
US OS NE
SHOULD BE:
taxes for the year
WIP Inventory (+A)
c) Current assets
US OS NE
Accrued Wages Payable (+L)
at year end
Finished Goods Inventory (+A)
WIP Inventory (-A)
d) Shareholders equity
US OS NE
at
year
end
CORRECTION
Finished Goods Inventory (+A)
NE; NE; US; NE
Accrued Wages Payable (+L)
What if sold:
Cost of Goods Sold (+E,-SE)
Accrued Wages Payable (+L)
NE; O/S; NE; O/S
b. Depreciation of factory equipment for 200 was not recorded. The related goods were sold
in March. No adjustment was made.
a) Cash flow from
operations for the year
US OS NE
US OS NE
DONE
c) Non-current assets
at year end
Nothing
SHOULD BE:
d) Shareholders equity
WIP Inventory (+A)
at year end
Accum. Depr. (+XA,-A)
Finished Goods Inventory (+A)
WIP Inventory (-A)
CGS Exp. (+E,-SE)
Finished Goods Inventory (-A)
CORRECTION
CGS Exp. (+E,-SE)
Accum. Depr. (+XA.-A)
NE; OS; OS; OS
Robert Libby
104
US OS NE
US OS NE
Required: Answer the following questions based on the partial Statement of Stockholders Equity
and Cash Flow Statement from Kimberly-Clarks Annual Report.
1) What was the average acquisition cost of the treasury shares issued for stock-based awards
exercised or vested during 2011?
2) Was this acquisition cost greater or smaller than the cash received from the exercise or vesting
of stock-based awards during 2011? By how much?
3) Cash dividends are not necessarily paid immediately. Ignore dividends to non-controlling
interests. Provide the 2011 values for:
a) Cash dividends declared
b) Cash dividends paid
c) Portion of cash dividends declared but not paid
4) What entry was made for the recognition of stock-based compensation during 2011? Ignore
taxes.
5) Assume that on January 1, 2011, Kimberly-Clark declared and distributed a 2 for 1 stock split
accounted for as a stock dividend. There was no change in par value of the shares and all
amounts and numbers of shares presented were retroactively restated to reflect the split.
a) What dollar amount would have been reported as Common Stock on December 31, 2010 in
the 2010 annual report?
b) What journal entry would they likely have recorded on January 1, 2011 for the stock split?
Robert Libby
105
2011
(Millions of dollars)
Financing Activities
Cash dividends paid
Net increase (decrease) in short-term debt
Proceeds from issuance of long-term debt
Repayments of long-term debt
Redemption of redeemable preferred securities
of subsidiary
Cash paid on redeemable preferred securities of
subsidiary
Proceeds from exercise of stock options
Acquisitions of common stock for the treasury
Other
Cash Used for Financing
Robert Libby
106
(1,099)
13
839
(107)
(500)
(57)
435
(1,246)
(19)
(1,741)
Common Stock
Issued
Shares
Amount
Robert Libby
478,597
-
Additional
Paid-in
Capital
598
-
425
-
Retained
Treasury Stock
Shares
Amount
Earnings
(Dollars in millions, shares in thousands)
Accumulated
Other
Comprehensive Noncontrolling
Income (Loss)
Interests
71,741
-
(4,726)
-
11,086
1,591
(236)
(13)
(133)
(31)
(1)
1
(47)
(7,924)
490
(50,000)
(62)
10
-
19,120
(50,000)
(1,247)
3,378
(3,316)
428,597
536
48
4
440
32,937
(2,105) $
(1,107)
(10)
8,244 $
107
(1,466)
-
(1,866) $
285
39
(29)
(2)
280
Robert Libby
108
SOLUTION
Kimberly-Clark (A) Stockholders Equity
Required: Answer the following questions based on the partial Statement of Stockholders Equity
and Cash Flow Statement from Kimberly-Clarks Annual Report.
1) What was the average acquisition cost of the treasury shares issued for stock-based awards
exercised or vested during 2011?
$490 million/7.924 million shares = $61.84 per share
2) Was this acquisition cost greater or smaller than the cash received from the exercise or vesting
of stock-based awards during 2011? By how much?
The acquisition cost of Treasury stock exceeded the cash received from the exercise of stock
options and stock awards by $47 million. (note the debit of $47 million to Additional Paid-In
Capital in the Statement of Stockholders Equity).
Cash (A)
443
Additional paid-in capital (SE)
47
Treasury Stock (XSE)
490
3) Cash dividends are not necessarily paid immediately. Ignore dividends to non-controlling
interests. Provide the 2011 values for:
a) Cash dividends declared
Portion of cash dividends declared but not paid $8 million (Difference between
dividends declared and dividends paid. Also on B/S as increase in Dividends payable)
4) What entry was made for the recognition of stock-based compensation during 2011? Ignore
taxes.
Compensation Expense (+E,-SE)
48
Additional Paid-in Capital (+SE)
48
5) Assume that on January 1, 2011, Kimberly-Clark declared and distributed a 2 for 1 stock split
accounted for as a stock dividend. There was no change in par value of the shares and all
amounts and numbers of shares presented were retroactively restated to reflect the split.
a) What dollar amount would have been reported as Common Stock on December 31, 2010 in
the 2010 annual report?
$598 million / 2 = $299 million.
b) What journal entry would they likely have recorded on January 1, 2011 for the stock split?
Retained Earnings or APIC (-SE)
299
Common Stock (+SE)
299
Robert Libby
109
Robert Libby
110
Nabors Case
Nabors Industries is the largest oil and gas land drilling contractor in the world. They also have
a large portfolio of available for sale securities. Their investments footnote and statement of
stockholders equity for a recent year are attached. Answer the following questions based on this
information. Note that all dollar amounts in the statements are in thousands ($000). Prepare
your answers in thousands also.
1. What adjusting entry did Nabors make at the end of 2012 to adjust available-for-sale
securities to market?
2. What journal entries did Nabors make related to the sale of available-for-sale securities
during 2012?
Robert Libby
111
3. INVESTMENTS
Certain information regarding our debt and equity securities is presented below:
Year Ended December 31,
2011
(In thousands)
2012
Available-for-sale
Proceeds from sales and maturities
Realized gains (losses), net
$
$
24,010
13,405
$
$
12,672
3,036
2010
$
$
13,062
1,694
2012
Robert Libby
164,034
112
94,695
21,073
98,138
(20,257)
5,356
60,897
278
(13,405)
84,733
(324)
702
106,184
(3,036)
2,320
(5,391)
763
(22,565)
(1,694)
(1,416)
(376)
(5,282)
53,823
(4,147)
110,331
274,365
621
(1,777)
(20,788)
222,891
1,045
4,477
49,346
144,041
85
(185)
723
311
243,679
2010
932
275,297
860
223,751
808
144,849
SOLUTION
Nabors Case
Nabors Industries is the largest oil and gas land drilling contractor in the world. They also have
a large portfolio of available for sale securities. Their investments footnote and statement of
stockholders equity for a recent year are attached. Answer the following questions based on this
information.Note that all dollar amounts in the statements are in thousands ($000). Prepare
your answers in thousands also.
1. What adjusting entry did Nabors make at the end of 2012 to adjust available-for-sale
securities to market?
98,138
98,138
2. What journal entries did Nabors make related to the sale of available-for-sale securities
during 2012?
Cash (+A)
Investment in AFS (-A)
Net unrealized losses/gains on AFS (-OCI, -SE)
Gain on sale (+R, +SE)
Robert Libby
113
24,010
24,010
13,405
13,405
Robert Libby
114
Kimberly-Clark (B)
Equity Method Investments
Required: Answer the following questions based on the attached excerpts from Kimberly-Clark's
2011 Annual Report.
1. What entry did Kimberly-Clark make in 2011 to record income from affiliates accounted for
under the equity method?
2. What entry did Kimberly-Clark make in 2011 to record dividends received from affiliates
accounted for under the equity method?
Robert Libby
115
Robert Libby
116
SOLUTION
Required: Answer the following questions based on Kimberly-Clark's 2011 Annual Report.
1. What entry did Kimberly-Clark make in 2011 to record income from affiliates accounted for
under the equity method?
161.0
2. What entry did Kimberly-Clark make in 2011 to record dividends received from affiliates
accounted for under the equity method?
138.0
138.0
Robert Libby
117
Robert Libby
118
Practice Quiz 1s
Summer 2005
Summer 2008
Robert Libby
119
Robert Libby
120
Name ________________________
Urban Outfitters is a major clothing retail chain. Its balance sheet, income statement, and
selected notes are presented on the following pages. Treat each item below independently and
ignore taxes. Watch the dates on the statements. Like the statements, all numbers are in
thousands of dollars.
Required:
Complete the following in the space provided.
1. What were dividends declared during the year ended January 31, 2004?
2. No common stock was repurchased. Record the journal entry for any issuance of their
common stock during the year ended January 31, 2004?
Robert Libby
121
3. What was cash collected from customers during the year ended January 31, 2004?
4. If rent expense for the year ended January 31, 2004 was $53,782, what amount of cash
was paid for rent during the year? Note that some rent is paid at the beginning of each
month and some rent is accrued at the end of the month and paid in the following month.
No rent is prepaid.
Robert Libby
122
January 31,
2004
2003
ASSETS
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable
Inventories
Prepaid expenses and other current assets
Deferred taxes
$ 67,194
19,979
6,711
63,247
13,872
4,832
$ 72,127
7,379
3,262
50,006
8,633
4,358
175,835
145,765
121,919
52,315
9,526
$359,595
108,847
15,640
8,925
$279,177
$ 27,353
7,756
22,653
$ 19,186
5,197
19,870
57,762
11,703
44,253
10,539
Total liabilities
69,465
54,792
5
83,282
204,905
1,938
4
67,160
156,529
692
290,130
$359,595
224,385
$279,177
Robert Libby
123
Net sales
Cost of sales, including certain buying, distribution and
occupancy costs
Gross profit
Selling, general and administrative expenses
334,888
271,963
235,311
213,473
132,767
150,791
105,392
113,647
88,149
80,706
1,524
(926)
45,399
1,497
(823)
25,498
318
(594)
81,304
32,928
46,073
18,660
25,222
10,215
Net income
Net income per common share:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
48,376
27,413
15,007
$
$
1.23
1.20
$
$
0.73
0.71
$
$
0.44
0.43
39,267,463
40,415,569
37,776,456
38,776,904
34,537,230
34,876,914
Selected Notes:
5.
$ 1,880
2,840
5,712
2,610
9,611
$ 1,095
2,867
3,523
4,379
8,006
Total
$22,653
$19,870
Robert Libby
124
Name ____SOLUTION_________
Urban Outfitters is a major clothing retail chain. Its balance sheet, income statement, and
selected notes are presented on the following pages. Treat each item below independently and
ignore taxes. Watch the dates on the statements. Like the statements, all numbers are in
thousands of dollars.
Required:
Complete the following in the space provided.
1. What were dividends declared during the year ended January 31, 2004?
Div. Declared
2. No common stock was repurchased. Record the journal entry for any issuance of their
common stock during the year ended January 31, 2004?
Cash (+A)
16,123
Common Stock (+SE) (5 - 4)
Additional Paid-in Capital (+SE) (83,282 - 67,160)
1
16,122
3. What was cash collected from customers during the year ended January 31, 2004?
Beg
Sales
End
4. If rent expense for the year ended January 31, 2004 was $53,782, what amount of cash
was paid for rent during the year? Note that some rent is paid at the beginning of each
month and some rent is accrued at the end of the month and paid in the following month.
No rent is prepaid.
Rent paid
Robert Libby
125
Robert Libby
126
Name ________________________
Campbell Soup Company is a major player in soups and sauces (Campbells and Prego) and biscuits
and confectionery (Pepperidge Farm and Godiva). Its 1997 and 1996 Balance Sheets, 1997 Statement
of Income, and selected notes are presented on the following pages. When I refer to 1997, I mean the
fiscal year ended August 3, 1997. Treat each item below independently. Watch the dates on the
statements. Like the statements, all numbers are in millions of dollars.
Required:
Complete the following in the space provided.
1)
2)
Assume that all Other Liabilities are deferred revenues. Advance payments from
customers were $972 during the year. Prepare the adjusting journal entry for the total amount
of revenues recognized during 1997 from goods delivered to customers that had paid in
advance.
Robert Libby
127
3)
Assuming that Campbell had done each of the following in preparation of its 1997
statements, and no adjustments to correct any errors were made, what would be the effect of
each on a) Total liabilities on August 3, 1997, b) Net Income for 1997, c) Current assets on
August 3, 1997, and d) Stockholders equity on August 3, 1997? Circle U/S for understate,
O/S for overst ate, or NE for no effect. Ignore income taxes.
The company failed to make the necessary end-of-period adjustment to record accrued
interest expense. No subsequent adjustment was made.
a) Total liabilities
on August 3, 1997
U/S O/S NE
b) Net Income
for 1997
U/S O/S NE
c)Current assets
U/S O/S NE
on August 3, 1997
d) Stockholders
U/S O/S NE
equity on August 3, 1997
4)
Assume that the company failed to record depreciation expense of $50 on a newly acquired
piece of equipment. No subsequent adjustment was made. Ignore taxes.
What amounts would they have reported on August 3, 1997 if any needed adjustment had
been made for:
Total Assets ______________________
Robert Libby
128
CAMPBELL SOUP CO
Consolidated Balance Sheet
Robert Libby
129
8/03/97
--
7/28/96
--
26
633
762
162
$1,583
2,560
1,793
523
$6,459
--
34
618
739
227
$1,618
2,681
1,808
525
$6,632
--
1,506
608
642
88
137
$2,981
1,153
442
463
$5,039
---
865
568
593
86
117
$2,229
744
452
465
$3,890
---
20
338
3,571
20
228
3,211
(2,459)
(50)
$1,420
6,459
(779)
62
$2,742
6,632
--
CAMPBELL SOUP CO
Consolidated Statements of Income
Robert Libby
130
8/03/97
-7,964
-4,305
1,636
324
77
140
216
$6,698
1,266
167
8
$1,107
394
$713
1.51
472
8/03/96
-7,678
-4,363
1,499
343
84
72
-$6,361
1,317
126
6
$1,197
395
$802
1.61
498
8/03/95
-7,250
-4,255
1,371
326
88
63
-$6,103
1,147
115
10
$1,042
344
$698
1.40
498
Name ____SOLUTION________
Campbell Soup Company is a major player in soups and sauces (Campbells and Prego) and biscuits
and confectionery (Pepperidge Farm and Godiva). Its 1997 and 1996 Balance Sheets, 1997 Statement
of Income, and selected notes are presented on the following pages. When I refer to 1997, I mean the
fiscal year ended August 3, 1997. Treat each item below independently. Watch the dates on the
statements. Like the statements, all numbers are in millions of dollars.
Required:
Complete the following in the space provided.
1)
2)
353
Assume that all Other Liabilities are deferred revenues. Advance payments from
customers were $972 during the year. Prepare the journal entry for the total amount of
revenues recognized during 1997 from goods delivered to customers that had paid in
advance.
2)
Other Liabs
Revenues
974
Robert Libby
131
Robert Libby
132
133
ROBERT LIBBY
Robert Libby
134
Cornell University
First Examination
NCC 500
FINANCIAL ACCOUNTING
Fall200l
NAME:
-----------------------------
Instructions:
This open book examination consists of one problem. The questions can be worked in any order.
Please show all calculations. Record your answers on the exam in the space provided. You may use
whatever books, notes and calculators you wish.
You may want to separate the pages while you work. Please re-staple them in the correct order when
you return the examination. A stapler will be available. There are 10 pages to this exam including
the cover.
Please read and sign the following statement:
Academic integrity is expected of all students of Cornell University at all times,
whether in the presence or absence of members of the faculty.
Understanding this, I declare I shall not give, use or receive unauthorized aid in this
examination.
Signature----------------
Points
Assigned
Suggested
Times
104
104 minutes
16
16 minutes
15 minutes
135 minutes
Robert Libby
135
2. (a) Which was higher during the 2000: sales or redemptions of "stored value cards and gift
certificates"? (Note that "redemption" means that customers exchange the cards or gift
certificates for merchandise.) (circle one) (8 points)
Sales
Redemptions
1_,
I
Robert Libby
136
3. How much more or less did AEOS pay in interest than they recognized as interest expense in
2000 (fill in the appropriate blank)? (8 points)
4. What mistake(s) did AEOS make in preparing the investing section of its Cash Flow
Statement for 2000? (Note that AEOS did not actually make these mistakes. They were
inserted into the statements.) (8 points)
Robert Libby
137
5. What was the accumulated depreciation on property and equipment disposed of during 2000? (8
points)
6. Assume that AEOS s borrowing on the notes payable took place on the last day of the fiscal
year, and no payments on th~ notes payable were made during 2000. What amounts were
borrowed on the notes payable during 2000? (8 points)
Robert Libby
138
7. Accrued rent relates to additional payments made to mall owners as a percentage of sales
when sales exceed specified levels. The amount payable is determined on the last day of the
fiscal year and is paid within 30 days of that date. What adjusting entry did AEOS make at the
end of2000 related to the additional rent. (8 points)
Robert Libby
139
8. Prepare the operating section of AEOS's Statement of Cash Flows for the year 2000 using the
indirect method. Stock compensation to employees was $6,952. Depreciation and
amortization expense was the only other revenue or expense that did not affect operating
assets or liabilities. Income taxes paid were $37,362. (14 points)
Robert Libby
140
9. Assume that at the end of2000, AEOS received $3,000 from customers for "Stored value
cards and gift certificates," and recorded the transaction by debiting cash and crediting sales
revenue. They also failed to make any entry related to accrued compensation of $2,800 for
services rendered but not paid. No adjusting entry related to either transaction was performed
at year end.
(a) Compute the amount that should have been reported as ''operating income" for 2000. (5
points)
(b) Compute the corrected amount of''working capital" at the end of2000. (7 points)
Robert Libby
141
10. Assume that AEOS had done each of the following in preparation of its 2000 statements, and
no adjustments were made. What would be the effect of each event on the following
amounts? Circle U/S for understate, 0/S for overstate, or NE for no effect. Treat each item
independently and ignore income tax effects.
(a)
AEOS failed to recognize $30 of accrued rent during 2000. No subsequent entry was
made. (8 points)
(b)
Robert Libby
(a)
Current liabilities
at year-end
U/S
0 /S
NE
(b)
U/S
0/S
NE
(c)
U/S
0/S
NE
(d)
Total assets
at year-end
U/S
0 /S
NE
AEOS incorrectly recorded a $100 payment on account to one of its suppliers in the
following manner.
Prepaid expenses
I0
Cash
10
No correcting entry was made. (8 points)
U/S
0 /S
NE
U/S
0/S
NE
(c)
0/S
NE
(d)
Total assets
at year-end
0/S
NE
(a)
Cunent liabilities
at year-end
(b)
142
lJ/S
(c)
Current assets
at year-end
U/S
O/S
NE
(b)
O/S
NE
(c)
U/S
O/S
NE
U/S
O/S
NE
(d)
Robert Libby
Retained earnings
at year-end
143
2. Assume that Gateway did the following in preparation of its 2000 statements, and no
adjustments were made. What would be the effect of the event on the following amounts?
Circle U/S for understate, 0 /S for overstate, or NE for no effect. Ignore income tax effects.
Gateway recorded factory utilities paid by debiting "Selling, general, and administrative
expenses" (and crediting cash). The related goods produced were in "components and
subassemblies inventory'' at the end of the 2000. No subsequent adjustment was made. (8
points)
Robert Libby
(a)
Current assets
at year-end
U/S
0/S
NE
(b)
U/ S
0/S
NE
(c)
U/S
0/S
NE
(d)
0/S
NE
144
First Examination
NCC 500 Financial Accounting
Fall2001
i
Robert Libby
145
Robert Libby
146
AMERICAN EAGLE
OUTFITTERS INC
Cost of sales
Gross profit
Selling, general and administrative
expenses
Depreciation and amortization expense
Operating income
Interest expense
Other income (expense), net
Income before income taxes
Provision for income taxes
Net income
Basic earnings per common share
Diluted earnings per common share
Weighted average common shares
outstanding -- basic
Weighted average common shares
outstanding -- diluted
1,093,477 $
587,600
657,252
----------436,225
475,596
---------356,508
353,089
----------234,511
266,474
194,795
138,847
23,200
12,199
8,611
----------- ---------- ----------146,551
149,514
87,053
623
5,626
(160)
2,436
----------- ---------- ----------151,554
149,354
89,489
57,796
58,694
35,371
----------- ---------- ----------$
93,758 $
90,660 $
54,118
----------- ---------- ----------$
1.35 $
1.30 $
0.80
----------- ---------- ----------$
1.30 $
1.24 $
0.75
----------- ---------- ----------69,652
69,555
67,921
----------- ---------- ----------72,132
73,113
71,928
----------- ---------- -----------
Robert Libby
832,104 $
147
AMERICAN EAGLE
OUTFITTERS INC
Robert Libby
148
02103/01
93,758
01/29/00 01130/99
90,660
54,118
$2,676
$2,033
$4,641 $23,581
71 ,940 48,359
76,581 71 ,940
AMERICAN EAGLE
OUTFITTERS INC
AMERICAN EAGLE OUTFITTERS INC
Consolidated Balance Sheet
In Thousands For Period Ended
Current assets:
Cash and cash equivalents
Short-term investments
Merchandise inventory
Accounts and note receivable, including related
party
Prepaid expenses and other
Deferred income taxes
Total current assets
Property and equipment, at cost, net of
accumulated depreciation and amortization
Goodwill, net of accumulated amortization
Deferred income taxes
Other assets, net of accumulated amortization
Total assets
Current liabilities:
Accounts payable
Current portion of note payable
Accrued compensation and payroll taxes
Accrued rent
Accrued income and other taxes
Unredeemed stored value cards and gift
certificates
Other liabilities and accrued expenses
Total current Uabilities
Non-current liabilities:
Commitments and contingencies
Note payable
Other non-current liabilities
Total non-current liabilities
Contributed capital
Retained earnings
Stockholders' equity
Total liabilities and stockholders' equity
Robert Libby
149
02103101
01129/00
01/30199
133,446
27,927
84,064
29,466
76,581
91,911
60,375
13,471
71,940
13,360
49,688
8,560
18,864
24.894
$318,661
6,640
13,584
$262,562
2,757
8,199
$154,504
183,373
23,780
10,129
7,103
$543,046
84,926
53,370
4,029
3,111
$354,628
2,200
874
$210,948
42,038
4,300
25,549
22,577
29,719
30,700
18,551
21,307
17,755
7,927
17,739
13,042
4,773
13,085
11,879
$149,147
7,703
3,033
$88,425
3,372
2,274
$59z?51
24,889
1,315
$26,204
93,403
2741292
367.695
$543.046
1,702
$1,702
83,967
180,534
264,501
$3541628
61,323
89.874
151 ,197
$210,948
AMERICAN EAGLE
OUTFITTERS INC
2.
Revenue Recognition
Revenue is recorded upon purchase of merchandise by customers. In
connection with stored value cards and gi ft certificates, a deferred
revenue amount is established upon purchase of the card by the customer and
revenue is recognized upon redemption and purchase of the merchandise.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expens e is
summarized as follows:
(In
thousands)
January 29,
2001
Advertising
expense
January 30,
1999
2000
36,262
27,243
16,431
January 29,
2001
January 30,
2000
1999
37, 362
Interest
607
45,741
Robert Libby
150
41,706
AMERICAN EAGLE
OUTFITTERS INC
6. Property and Equipment
Property and equipment consists of the following:
February
3,
2001
(In thousands)
January
2000
--------Land
Buildings
Leasehold improvements
Fixtures and equipment
--------
1,855
10,266
134,930
93,186
70 ,4 03
52,336
46,996
36, 30 7
--------
122 ,739
(37,813)
(56, 864)
----------
--------240,237
January
30,
1999
29,
---------83,303
(29, 933)
Depreciation expense
Robert Libby
21,472
151
11, 782
8,215
Gateway
GATEWAY INC
Consolidated Statements of Income
Robert Libby
152
12131/2000
9,600,600
7,541,606
2,058,994
1,547,701
is11 ,29~
(102,693)
$408,600
1~5,26~
12131/1999
8,964,900
7,127,678
1,837,222
1,241,552
$59~.670
67.si59
$663,479
23~.535
12131/1998
7,703,279
6,290,227
1,413,052
918,825
$494,227
47,021
1541,248
194,849
$253,334
$427,944
$346,399
(11,851l
$241,483
$42,,944
$346,399
0.79
0.76
1.36
1.32
1.11
1.09
0.75
0.73
1.36
1.32
1.11
1.09
321,742
331,320
313,974
324,421
311,084
317,857
IGateway
GATEWAY INC
11.
(in thousands)
2000
Inventory:
Components and subassemblies
Finished goods
Intangibles:
Intangibles
Accumulated amortization
Other assets:
Financing receivables, net of allowance for losses
Longterm investments
Deferred Income taxes
Other
Less other current assets
Robert Libby
153
1999
557,479
(12,724}
544,755
662,811
(16,472)
646,339
252,085
62,984
315,069
183,321
8,549
191,870
18,766
169,715
202,100
159,386
250,775
348,742
134,009
25,203
1,308,696
(411,282)
897,414
18,758
107,317
202,102
158,305
172,501
319,585
99,959
13,477
1,092,004
(346,344)
745,660
226,702
(60,788)
165,914
91,220
(38,918}
52,302
701,659
339,143
290,596
283,924
1,615,322
(793,166)
295,812
212,865
211,921
261 ,548
982,146
(522,225)
.
Robert Libby
154
Fall2001
First Examination Solution
I!'
.; '"';{
(1) (6poims)
-4
(2) Sold more than they redeemed
Because the ending balance in the liability (13,085} is larger than the -4
beginning balance (7,703)
(8poinrs)
607
623
j16J
AID on disp.
-5
-5 (10a)
Accum. Depreciation
37,813 Beg
-2
2,421
21 .472 Depreciation Exp. -2 (10b)
56,864 End
-2
Repayment
0 Beg
-2
29,189 Borrowing
-4
-2 (10c)
29,1 89 End
(-4 if missing current or non-current)
or4300+24889
-4
-4
(7)
Rent expense (SG&A) (E) (-2)
Accrued rent (L) (-2)
(8 points)
22.577
2000
-4
146,551 -2
(3,000) -2
(2,800) -2
140.751
169,514 -2
(3.000) -2
(2,800} -2
163,714
(-2 each)
(8 poillls)
30
(-2 each)
(8 points)
10
90
(-2 each)
(8points)
300
Gat:iwa'Y: C<lml)(lter ~
(8 points)
Writeoffs
93,758
23,200
6,952
(23,689)
(15,995)
(12,224)
(11,310)
(6,100)
11,338
4,242
4,822
21,792
5,382
8,846
111,014
155
':...~
-;
16,472 Beginning
100,754
-I
97,006 Expense*
12,724 End
*( (.01 X 9,600,600) + 1,000 = 97,006)
-3
-3
(2)
~ 1~
1999
Robert Libby
2,800
2.2 ,577
(1)
2,800
(6) (8 points)
3,000
Div. Declared
(5) (2 poinrs)
3,000
(2 each)
(8points)
-1
Robert Libby
156
First Examination
NCC 500
FINANCIAL ACCOUNTING
Summer 2004
NAME:___________________________________
Instructions:
This open book examination consists of one problem. The questions can be worked in any order.
Please show all calculations. Record your answers on the exam in the space provided. You may use
whatever books, notes and calculators you wish.
You may want to separate the pages while you work. Please re-staple them in the correct order when
you return the examination. A stapler will be available. There are 10 pages to this exam including
the cover.
Please read and sign the following statement:
Academic integrity is expected of all students of Cornell University at all times,
whether in the presence or absence of members of the faculty.
Understanding this, I declare I shall not give, use or receive unauthorized aid in this
examination.
Signature
Points
Assigned
Suggested
Times
120
120 minutes
Review
45 minutes
120
Robert Libby
157
165 minutes
2) What was the net book value of Property, plant, and equipment sold during 2003?
Robert Libby
158
3)
Payments on account
4) Accrued expenses are recorded at the end of the current month and paid during the next month.
What was the journal entry to record accrued expenses at the end of June 2003?
Robert Libby
159
5) Additional Customer deposits received during 2003 were $487,000. What was revenue
recognized during 2003 from customers who had paid in advance?
Robert Libby
160
7) Prepare the Cash flow from operating activities section of the 2003 Cash Flow Statement.
Consider the following additional information. Stock compensation was $148,312.
Payments for interest were $1,035,553. Other assets relate to intangibles (trademarks)
which are not amortized. (Note: Do not try to reconcile your answer for cash flow from
operating activities with the change in cash.)
Robert Libby
161
8) What was the effect of properly recording the following item on "income before income taxes,"
"cash flow from operating activities," and "cash flow from investing activities" for 2003?
Indicate the direction ("+" for increase, "-" for decrease, and "NE" for no effect) and amount
of the effect. Ignore tax effects.
The company paid the CFO her 2003 bonus in the form of a boat with a cost of production of
$50,000:
Income before income taxes
+___________
-_____________
NE
-_____________
NE
Robert Libby
-_____________
NE
162
9)
10) What was the adjusting journal entry to record warranty expense during 2003?
Robert Libby
163
11) Assuming Fountain repurchased none of its outstanding common stock during 2003, what
journal entry summarizes the issuance of common stock during 2003? (Ignore treasury stock and
stock-based compensation for this question.)
12) Assume that Fountain had done each of the following in preparation of its 2003 financial
statements. Indicate the effect of each on the listed items. Circle U/S for understate, O/S for
overstate, or NE for no effect. Treat each item independently and ignore income taxes.
(a) They recorded the purchase of $100 of plant and equipment with a useful life of 5 years for
cash as a General and administrative expense at the beginning of 2003.
a) Total assets
on June 30, 2003
U/S O/S NE
b) Net Income
for 2003
U/S O/S NE
c) Cash flow
from operations
for 2003
U/S O/S NE
d) Stockholders
U/S O/S NE
equity on June 30, 2003
Robert Libby
164
(b) They recorded $10 cash received on July 1, 2002 related to accrued interest revenue (that was
properly recorded during fiscal 2002) by making the following entry:
Cash
10
Interest revenue
10
a) Working capital
on June 30, 2003
U/S O/S NE
b) Net Income
for 2003
U/S O/S NE
c) Cash flow
from operations
for 2003
U/S O/S NE
d) Stockholders
U/S O/S NE
equity on June 30, 2003
(c) They recorded $10,000 depreciation on newly purchased equipment as $1,000 during 2003.
a) Current assets
on June 30, 2003
U/S O/S NE
b) Cash flow
U/S O/S NE
from investing
activities for 2003
c) Cash flow
from operations
for 2003
U/S O/S NE
d) Stockholders
U/S O/S NE
equity on June 30, 2003
Robert Libby
165
Chap. 6
(d) They failed to record $1,000 in bad debt expense during 2003.
a) Total assets
on June 30, 2003
U/S O/S NE
b) Cash flow
U/S O/S NE
from financing
activities for 2003
c) Cash flow
from operations
for 2003
U/S O/S NE
d) Stockholders
U/S O/S NE
equity on June 30, 2003
Robert Libby
166
First Examination
NCC 500 Financial Accounting
Summer 2004
Robert Libby
167
6/30/2003
-52,557,084
(44,037,957)
$8,519,127
-4,609,253
1,820,764
-$6,430,017
2,089,110
-5,567
(1,037,002)
(8,378)
$(1,039,813)
1,049,297
569,944
$479,353
Robert Libby
168
06/30/03
-479,353
-153,810
(1,325,262)
(390,199)
$(1,561,651)
-omitted
omitted
(1,265,529)
omitted
895,295
329,640
1,224,935
2002
798,700
45,424
$
$
2001
709,585
12,016
Robert Libby
169
Robert Libby
170
06/30/03
-1,224,935
06/30/02
-329,640
2,015,371
3,460,286
644,581
807,315
$8,152,488
16,165,684
1,378,626
736,288
$26,433,086
-1,080,562
7,667,805
1,317,398
190,010
290,658
200,000
900,000
$11,646,433
9,010,527
1,207,958
-21,864,918
--
3,003,992
3,090,451
328,783
1,132,181
$7,885,047
17,114,661
1,179,223
355,765
$26,534,696
-934,856
7,024,628
1,193,672
921,707
631,090
200,000
870,000
$11,775,953
9,827,161
962,880
-22,565,994
--
47,576
10,436,551
(5,801,326)
$4,682,801
(110,748)
(3,885)
$4,568,168
26,433,086
47,326
10,343,935
(6,280,679)
$4,110,582
(110,748)
(31,132)
$3,968,702
26,534,696
Note 1.
is
its
Revenue
Recognition: The Company generally sells boats only
to
authorized dealers and to the U.S. Government. A sale is recorded when
a boat is shipped to a dealer or to the Government, legal title and all
other incidents of ownership have passed from the Company to the dealer
or to the Government, and an account receivable is recorded or payment
is received from the dealer, from the Government, or from the dealer's
third-party commercial lender. This is the method of sales recognition
in use by most boat manufacturers.
The Company has developed criteria for determining whether a shipment
should be recorded as a sale or as a deferred sale (a balance sheet
liability).
The criteria for recording a sale are that the boat has
been completed and shipped to a dealer or to the Government, that title
and all other incidents of ownership have passed to the dealer
or to
the Government (title passes at the point of shipment), and that there
is no direct or indirect commitment to the dealer or to the Government
to repurchase the boat or to pay floor plan interest for the dealer
beyond the normal, published sales program terms.
Advertising Cost: Cost incurred in connection with advertising and
promotion of the Company's products are expensed as incurred.
Such
costs amounted to $1,031,661, $775,524 and $1,123,976 for the years
ended 2003, 2002 and 2001, respectively.
Warranties: The Company warrants the entire deck and hull, including
its supporting bulkhead and stringer system, against defects
in
materials and workmanship for a period of six years. The Company has
accrued a reserve for these anticipated future warranty costs.
Robert Libby
171
Note 3.
27,841
307,393
257,393
2,599,979
130,287
870,000 1,182,573 1,152,573
200,000
-
Robert Libby
172
27,841
50,000
2,730,266
900,000
200,000
Fountain Powerboats
Retained earnings
(9) (8 points) (a) prepayments
-4
Beg 6,280,679.0
-2
(b) Prepaid expenses increased during 2003
-4
Div. Declared
0.0
479,353 Net income
-4
End
5,801,326
-2 (10) Warranty expense (E) -2
1,182,573
(-3 for number)
no beginning dividends payable so dividends paid equals 0.0
Warranty reserve (L) -2
1,182,573
(or no dividends paid in cash flow statement)
(7 points)
(8 points)
P&E (Net)
Beg 17,114,661
2,112,051 Depr. Exp.
-2 (11) Cash (A)
92,866
Purchases
1,325,262
162,188 Disposals
Common Stock (SE)
250
End 16,165,684
Additional paid-in capital (SE)
92,616
(or solve for P&E gross and subtract Acc depr; -4 each)
(6 points; -1 each account and amount)
(1) (8 points)
(2)
-2
-2
-2
-4 (12a)
-4
1,317,398
(-3 for number)
(4) Various expenses (E) (-2)
Accrued expenses (L) (-2)
1,317,398
(7 points) (the ending balance in "Accrued expenses")
(5) (8 points)
Revenues
(6) (8 points)
Customer deposits
631,090 Beg
827,432
487,000 Deposits
290,658 End
-2
-4
-2 (12c)
10,762,017 Beg
594,601 Proceeds
10,091,089 End
(* -1.5 for each missing element of beginning and ending)
-2
(12b)
Payments
-3*
(-2 each)
(8 points)
100
20
(-2 each)
(8 points)
10
(-2 each)
(8 points)
9,000
1,265,529
-3* (12d)
Robert Libby
173
(-1 math)
Robert Libby
174
First Examination
NCC 5000
FINANCIAL ACCOUNTING
Summer 2009
NAME:___________________________________
Instructions:
This open book examination consists of one problem. The questions can be worked in any order.
Please show all calculations. Record your answers on the exam in the space provided. You may use
whatever books, notes and calculators you wish. You may not use a computer, PDA, cell phone, or
similar device. You have 2 hours and 45 minutes to complete the exam.
You may want to separate the pages while you work. Please re-staple them in the correct order when
you return the examination. A stapler will be available. There are 10 pages to this exam including
the cover.
Please read and sign the following statement:
Academic integrity is expected of all students of Cornell University at all times,
whether in the presence or absence of members of the faculty.
Understanding this, I declare I shall not give, use or receive unauthorized aid in this
examination.
Signature
Points
Assigned
Suggested
Times
120
120 minutes
Review
45 minutes
120
Robert Libby
175
165 minutes
2.
How much higher or lower were Advance payments from customers than Revenue
recognized on sales to customers that paid in advance, during 2003? (circle one and fill in the
blank if appropriate)?
Advance payments were ____________ higher than Revenue recognized.
Advance payments were ____________ lower than Revenue recognized.
There was no difference between Advance payments and Revenue recognized.
Robert Libby
176
3. What was the Accumulated depreciation on property and equipment disposed of during
2003?
4. The following information includes all of Microsofts investing transactions during 2003, as
well as some non-investing transactions. Based on this information only, prepare the investing
section of the 2003 cash flow statement. The transactions are cash transactions unless
otherwise indicated. Do not try to reconcile these amounts to the cash flow statement
presented.
Acquisitions of companies, net of cash acquired
Acquisition of Navision, Inc. for Microsoft stock
Additions to property and equipment
Dividends paid on common stock
Dividends received on investments
Purchases of investments
Maturities of investments
Sales of investments
Robert Libby
177
(1,063)
(803)
(891)
(857)
1,266
(89,621)
9,205
75,157
5. During 2003, Microsoft engaged in a variety of transactions that affected the common stock
and paid-in capital account. What journal entry did they make to record the issuance of their
common stock for cash? (Note that Microsoft combines common stock and paid-in capital
into a single account called common stock and paid-in capital because they have no
economic meaning as separate accounts. You should do the same in this problem.)
6. Assume that all Compensation is accrued at the end of the current month and paid at the
beginning of the following month. What journal entry did Microsoft make for the payment of
compensation at the beginning of the first month of fiscal year 2003?
Robert Libby
178
7. Prepare the operating section of Microsofts Statement of Cash Flows for the year 2003 using
the indirect method. Assume that Depreciation expense is the only expense that did not affect
operating assets and liabilities. Income taxes paid were $1,300. Other long term assets are
long term receivables from customers. Other long term liabilities are owed to employees.
(Note: Your computation will not reconcile with the cash flow statement information in the
Financial Statements and Notes package.)
Cash Flow from Operating Activities:
Robert Libby
179
8. Assume that other current assets consist of prepaid expenses related to research and
development, and that all research and development expenses are paid for in advance.
What were total cash payments made for research and development during 2003?
9. Assume that for 2003, Microsoft estimated that bad debt expense related to sales in 2003
would equal .5% of net sales, and that they had overestimated bad debt expense in 2002 by
$10. Assume also that they made the appropriate adjusting entry at the end of the period for
these amounts. What were write-offs of bad debts during 2003? (Round to the nearest
Chap. 6
million.)
Robert Libby
180
10. What was the effect of properly recording the following items on the listed financial statement
amounts for 2003? Indicate the direction ("+" for increase, "-" for decrease, and "NE" for no
effect) and amount of the effect. Ignore tax effects.
a. The company paid the CEO his 2003 bonus in the form of stock with a market value of
$50:
Income before income taxes
+___________
-_____________
NE
-_____________
NE
-_____________
NE
b. At the end of the period, the company determined that inventory with a cost of $300 had a
replacement cost of $270:
Chap. 7
Income before income taxes
+___________
-_____________
NE
-_____________
NE
-_____________
NE
Total assets
+___________
Robert Libby
181
11. Assume that on June 1, 2003, Microsoft recorded an advance payment from a customer of $10
by debiting cash and crediting revenue for $10. The goods and services will be delivered on
October 30, 2003. Further assume that on June 30, 2003, it failed to make an adjusting entry
for depreciation of factory equipment of $6. The related goods were still in inventory at year
end. No adjusting entry related to either transaction was performed at year end. Ignore taxes.
(a) Compute the amount that should have been reported as Net Income for 2003.
(b) Compute the corrected amount of working capital at the end of 2003.
Robert Libby
182
12. Assume that Microsoft had done each of the following in preparation of its 2003 statements,
and no adjustments were made. What would be the effect of each event on the following
amounts? Circle U/S for understate, O/S for overstate, or NE for no effect. Treat each item
independently and ignore income tax effects.
(a)
Microsoft accidentally recorded a $50 payment for sales and marketing expenses (E) for
the month of June by making the following entry:
Chap. 7
Inventory
50
Cash
50
The related goods were still in inventory. No subsequent adjusting entry was made.
(a)
Total assets
at year-end
U/S
O/S
NE
(b)
U/S
O/S
NE
(c)
U/S
O/S
NE
U/S
O/S
NE
(d)
(b)
Microsoft estimated and recorded the ending balance in Lifo Reserve as $20 when it
should have been $15. The beginning balance was correct. No correcting entry was made.
Chap. 7
(a)
Total assets
U/S O/S NE
at year-end
(b)
Robert Libby
Retained earnings
at year-end
Total liabilities
At year-end
U/S
O/S
NE
(c)
U/S
O/S
NE
(d)
O/S
NE
183
(c)
On June 30, 2003, Microsoft received an advance payment from a customer of $50 and
recorded the following entry:
Cash
50
Revenue
50
The goods will be delivered in 2005. No subsequent adjusting entry was made.
(a)
Current liabilities
at year-end
U/S
O/S
NE
(b)
U/S
O/S
NE
(c)
U/S
O/S
NE
U/S
O/S
NE
(d)
Robert Libby
Retained earnings
at year-end
184
First Examination
NCC 5000 Financial Accounting
Summer 2009
Robert Libby
185
INCOME STATEMENTS
(In millions, except earnings per share)
Year Ended June 30
Revenue
Operating expenses:
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total operating expenses
Operating income
Losses on equity investees and other
Investment income/(loss)
Income before income taxes
Provision for income taxes
Income before accounting change
Cumulative effect of accounting change (net of income taxes
of $185)
Net income
Basic earnings per share(1):
Before accounting change
Cumulative effect of accounting change
2001
$25,296
3,455
4,379
4,885
857
13,576
11,720
(159)
(36)
11,525
3,804
7,721
2002
$28,365
5,191
4,307
5,407
1,550
16,455
11,910
(92)
(305)
11,513
3,684
7,829
2003
$32,187
5,686
4,659
6,521
2,104
18,970
13,217
(68)
1,577
14,726
4,733
9,993
(375)
$ 7,346
$ 7,829
$ 9,993
0.72
(0.03)
$ 0.69
0.72
0.72
0.70
0.70
0.93
0.93
(1)
0.69
(0.03)
$ 0.66
0.92
0.92
(1)
10,683
11,148
Robert Libby
186
10,811
11,106
10,723
10,882
BALANCE SHEETS
(In millions)
June 30
Assets
Current assets:
Cash and equivalents
Short-term investments
Total cash and short-term investments
Accounts receivable, net
Inventories
Deferred income taxes
Other
Total current assets
Property and equipment, net
Equity and other investments
Goodwill
Intangible assets, net
Other long-term assets
Total assets
2002
Robert Libby
187
2003
3,016 $
35,636
38,652
5,129
673
2,112
2,010
48,576
2,268
14,191
1,426
243
942
67,646 $
6,438
42,610
49,048
5,196
640
2,506
1,583
58,973
2,223
13,692
3,128
384
1,171
79,571
1,208 $
1,145
2,022
5,920
2,449
12,744
1,823
398
501
1,573
1,416
2,044
7,225
1,716
13,974
1,790
1,731
1,056
31,647
20,533
52,180
67,646 $
35,344
25,676
61,020
79,571
2001
2002
2003
7,346 $
7,829 $
9,993
1,620
(6,074)
1,497
(6,069)
2,120
(6,486)
(5,586)
(4,572)
(5,223)
Omitted
Net cash used for financing
Investing
Omitted
Net cash used for investing
Net change in cash and equivalents
Effect of exchange rates on cash and equivalents
Cash and equivalents, beginning of year
Cash and equivalents, end of year
Robert Libby
188
(898)
(26)
4,846
3,922 $
(908)
2
3,922
3,016 $
3,361
61
3,016
6,438
Balance at
beginning of period
$ 186
174
209
Charged to costs
and expenses
$ 157
192
omitted
Write-offs
and other
$ 169
157
omitted
Balance at
end of period
$ 174
209
242
2002
197
1,701
2,621
1,372
5,891
(3,623)
$ 2,268
$
2003
248
1,854
2,464
1,512
6,078
(3,855)
$ 2,223
$
During 2001, 2002, and 2003, depreciation expense, the majority of which related to computer
equipment, was $764 million, $820 million, and $929 million.
Robert Libby
189
Robert Libby
190
Summer 2009
First Examination Solution
(1) (8 points)
Div. Declared
Retained earnings
20,533 Beg
4,850
9,993 Net income
25,676 End
Microsoft
(9)
-2
-3
-2
(8 points)
(2) (8 points)
Current
Noncurrent
Total
7,225
1,790
9,015 -3 (10a) Income before income taxes
Ending
Beginning
5,920
1,823
7,743 -3
Cash flow from operating activities
Increase
1,272
Cash flow from financing activities
Advance payments were 1,272 higher
Compensation expense (E)
50
(-2 for direction)
CS and PIC (SE)
(-3 for leaving out current or non-current or reversing years)
(6 points)
Acc. Depr. (XA)
(10b) Income before income taxes
(3) (8 points)
3,623 Beg
-2
Cash flow from operating activities
Disposals
697
929 Depr. Exp.
-3
Total assets
CGS (E)
30
3,855 End
-2
-2
Beg
Payments
End
Robert Libby
-2
-50
NE
NE
-2
-2
-2
-2
-30
NE
-30
-2
-2
-2
30
(1,063)
(891)
(89,621)
9,205
75,157
(7,213)
9,993
929
(67)
33
(394)
427
(229)
365
271
22
1,305
(733)
(33)
1,333
555
13,777
191
9,993
(10)
9,983
44,999
(10)
6
44,995
Revenue (R)
10
Short-term unearned revenue (CL)
Inventory (CA)
6
Accumulated Depreciation (XA)
(12 points)
(8) (8 points)
-2
Beginning
Expense
Ending
(6 points)
(7 points)
-4
50
Inventory (A)
(4) (-2 points each missing or extra to -8)
Acquisitions of companies, net of cash acquired
Additions to property and equipment
Purchases of investments
Maturities of investments
Sales of investments
Cash flow from investing
150.935
10
6
(-2 each)
(8 points)
50
(-2 each)
(8 points)
5
(-2 each)
(8 points)
50
50
-3
-3
-2
-2
-2
Robert Libby
192
Midterm Examination
NCC 5000
FINANCIAL ACCOUNTING
Summer 2010
Name: _________________________
Instructions:
This open book examination consists of multiple questions. (Be sure that your examination contains 10
pages, including this page.) All questions are based on the information in the financial statements and
notes packet you were given. Questions can be worked in any order. For partial credit, please show all
calculations and state any assumptions you make. Record your answers on the exam in the space
provided. You may use whatever books, notes, and calculators (without spreadsheet capabilities) you
wish. No communications devices may be used. You have 2 hours and 45 minutes to complete this
exam.
By completing this exam, I acknowledge that I have read and agreed to abide by the School Honor
Code.
Points
Assigned
Suggested
Times
120
140 minutes
Review
25 minutes
120
Robert Libby
193
165 minutes
Robert Libby
194
3) Prepare the Cash flow from operating activities section of the 2006 Cash Flow Statement.
Consider the following additional information. Depreciation and Amortization of Fixed Assets was
$7,906, Amortization of Intangibles was $1,402, Income Taxes Paid was $5,487, Gain on Disposal
of Fixed Assets was $31, and Other Long-Term Assets are receivables from customers. (Note:
Your computation will not reconcile with the cash flow statement information in the
Financial Statements and Notes package.)
Robert Libby
195
4) All interest is recorded when paid or accrued at the end of the year (no interest is prepaid). What
journal entry did Green Mountain make for all interest during 2006?
5) What was the total amount of cash paid for advertising during 2006?
Robert Libby
196
6) What was the accumulated depreciation on fixed assets disposed of during 2006?
7) What journal entry for the write-off of bad debts was made during 2006?
Robert Libby
197
8) Assume that other current assets are Prepaid Expenses. How much higher or lower were
Prepayments of expenses than Expirations of prepaid expenses during 2006? (circle one and fill in
the blank if appropriate)?
Prepayments were ____________ higher than Expirations.
Prepayments were ____________ lower than Expirations.
There was no difference between Prepayments and Expirations.
9) Assume that there were no stock repurchases during 2006. What entry was made for stock
issuances during 2006?
Robert Libby
198
10) Assume that on September 30, 2006, the company recorded a purchase of $10 of inventory by
debiting Fixed Assets and crediting Cash for $10. Further assume that at the end of 2006, it failed
to make an adjusting entry for accrued interest revenue of $6. No adjusting entry related to either
transaction was performed at year end. Ignore taxes.
(a) Compute the amount that should have been reported as Net Income for 2006.
(b) Compute the corrected amount of working capital at the end of 2006.
Robert Libby
199
11) What were the effects of correctly recording the following item? Indicate the direction ("+" for
increase, "-" for decrease, and "NE" for no effect) and amount of the effect. Ignore tax effects.
During 2007, the company discovered that it had underestimated bad debt expense by $20 for
2006:
Chap. 6
Income before income taxes for 2007
+___________
-_____________
NE
-_____________
NE
-_____________
NE
12) Assume that the company had done each of the following in preparation of its 2006 statements, and
no adjustments were made. What would be the effect of each event on the following amounts?
Circle U/S for understate, O/S for overstate, or NE for no effect. Treat each item independently
and ignore income tax effects.
(a)
At year end, the company recorded interest (paid in cash) related to construction in progress
by making the following entry. No correcting entry was made.
Chap. 8
Interest expense
Cash
Robert Libby
10
10
(a)
Total assets
at year-end
(b)
U/S
O/S
NE
U/S
O/S
NE
(c)
U/S
O/S
NE
(d)
O/S
NE
200
(b) The company recorded an advance payment from a customer by making the following
entry.
Cash
Sales revenue
No correcting entry was made.
(a)
Total liabilities
at year-end
(b)
U/S
O/S
NE
U/S
O/S
NE
(c)
U/S
O/S
NE
(d)
Retained earnings
at year-end
U/S
O/S
NE
(c) During January of 2006, $10 of interest on a 6 month certificate of deposit (purchased on
July 1, 2005) was received and recorded as follows:
Cash
10
Interest revenue
10
No correcting entry was made.
Robert Libby
(a)
Total assets
at year-end
(b)
U/S
O/S
NE
U/S
O/S
NE
(c)
U/S
O/S
NE
(d)
O/S
NE
201
(d)
Robert Libby
Sales on account from the first quarter of 2007 were accidentally recorded in the fourth
quarter of 2006. Cost of Sales was recorded in the proper period. No subsequent adjusting
entry was made.
(a)
(c)
U/S
O/S
NE
U/S
O/S
NE
(d)
U/S
O/S
NE
(a)
Retained earnings
at year-end 2007
U/S
O/S
NE
202
10
Midterm
NCC 5000 Financial Accounting
Summer 2010
Robert Libby
203
Robert Libby
204
09/30/06
-1,274
09/24/05
-6,450
30,071
31,796
2,816
618
1,384
$67,959
48,811
-39,019
75,305
2,912
$234,006
16,548
14,072
1,274
-1,346
$39,690
39,507
9,765
-1,446
739
$91,147
97
23,124
5,606
9,108
874
-$38,809
102,800
71
17,386
---
3,530
11,228
1,929
5,054
60
717
$22,518
-5,218
3,019
---
879
27,923
46,138
$74,940
$234,006
864
21,833
37,695
$60,392
$91,147
Robert Libby
205
9/30/2006
$225,323
143,289
82,034
46,808
17,112
18,114
(761)
(2,261)
15,092
(6,649)
$8,443
09/30/06
--
--
Omitted
Net cash provided by operating activities
Cash flows from investing activities:
--
(13,613)
493
-102,800
(8,580)
Omitted
Omitted
Robert Libby
206
(5,176)
6,450
1,274
-2,235
5,487
Advertising costs
The Company expenses the costs of advertising the first time the advertising
takes place, except for direct mail campaigns targeted directly at consumers,
which are expensed over the period during which they are expected to generate
sales. At September 30, 2006 and September 24, 2005, prepaid advertising costs
of $113 and $138, respectively, were recorded in other current assets
in the accompanying consolidated balance sheet. Advertising expense totaled
$9,132, $5,609, and $5,194, for the years ended September 30, 2006,
September 24, 2005, and September 25, 2004, respectively.
Robert Libby
207
4. Fixed Assets
Fixed assets consist of the following:
Production equipment
Equipment on loan to wholesale
customers
Computer equipment and software
Building
Furniture and fixtures
Vehicles
Leasehold improvements
Useful Life in
Years
1 - 15
3 - 7
2 - 10
30
1 - 10
4 - 5
1 - 11 or
remaining life of
the lease,
whichever is less
Construction-in-progress
Total fixed assets
Accumulated depreciation
11,241
5,455
3,214
898
1,861
4,433
79,713
(30,902)
$ 48,811
1,684
63,785
(24,278)
$ 39,507
Total depreciation and amortization expense relating to all fixed assets was
$7,906, $6,048, $4,674 for fiscal 2006, 2005, and 2004, respectively.
Assets classified as construction-in-progress are not depreciated, as they are
not ready for production use. All assets classified as construction-in-progress
on September 30, 2006 are expected to be in production use before the end of
fiscal 2007.
The Company regularly undertakes a review of its fixed assets records. In
fiscal 2006, 2005 and 2004, the Company recorded impairment charges related to
obsolete equipment amounting to $23, $126 and $23, respectively. In
fiscal 2006, the impairment was recorded under the "GMCR" segment of the
Company.
Description
Robert Libby
Additions
Balance at Charged to Charged to Deductions Balance at
Beginning of Costs and
Other
End of
Period
Expenses
Accounts
Period
$ 544
$ 481
$ 439
$ 577
$ 315
$ 253
208
----
$
?
$ 252
$ 211
$ 1,021
$ 544
$ 481
Retained earnings
37,695
Div. Declared
0
8,443
46,138
Since no dividends payable, Dividends paid = 0
8 (2) (8 points)
Current
Noncurrent
97
71
Ending
Beginning
3,530
5,218
Long-term debt (L)
(8 points)
8,748
-4
Repayment
8,580
0
168
(-4 for leaving out current or non-current,
-3 additional item or reversing years)
12 (3) (12 points)
2006
2005
Net income
Depreciation and amort of FA
Amort of Intangibles
Gain on Disposal of FA
Accounts receivable
30,071
16,548
Inventories
31,796
14,072
Other current assets
2,816
1,274
Income tax receivable
618
0
Deferred income taxes
1,384
1,346
Other long-term assets
2,912
739
Accounts payable
23,124
11,228
Accrued compensation
5,606
1,929
6 (1) (6 points)
168
8,748
Beg
Issuance
End
Accrued expenses
9,108
5,054
874
60
Other short-term liabilities
Income taxes payable
0
717
Deferred income taxes
17,386
3,019
Cash Flow from Operations
(-1 each extra or omitted to -11; if years consistently reversed -3)
(including impairment loss ok)
9 (4) 9 points)
Interest Expense
2,261
Cash
2,235
Accrued interest (L)
26
(-1 each account and -2 each amount)
7 (5) (7 points)
Beg
-2
Payments
-2
End
7 (6) (7 points)
Disposals
8 (7) (8 points)
Writeoffs
Allowance for DA
Accounts Rec.
6
15
6090
-2
8,443
7,906
1,402
(31)
(13,523)
(17,724)
(1,542)
(618)
(38)
(2,173)
11,896
3,677
(11) (9 points)
Income before income taxes
Cash flow from operating activities
Total assets
Bad debt exp (E)
20
Allow for Bad debts (XA)
4,054
814
(717)
14,367
16,193
8,443 -2 10
6 -2
8,449
29,150 -2
10 -2
6 -2
29,166
10
6
9
-20
NE
-20
-3
-3
-3
20
(12a)
(-2 each)
(8 points)
(12b)
(-2 each)
(8 points)
(12c)
(-2 each)
(8 points)
5
5
-3
(12d)
-2
-3
-2
(-2 each)
(8 points)
-1
-2
-1
1,542 Higher
(-3 amount and -3 direction)
120
63
Robert Libby
57
209
Robert Libby
210
Name ________________________
Eli Lilly is engaged in the discovery, development, manufacture, and sale of products and
the provision of services in the Life Sciences industry. Its 1995 and 1994 Balance Sheets, 1995
Statement of Income, and selected notes are presented on the following pages. Treat each item
below independently. Watch the dates on the statements. All numbers in the statements and in
the questions are in $millions.
1. a) Bad debt expense was $28 during 1995. What was the amount of write-offs of bad debts in
1995? There were no reinstatements.
Chap. 6
b) What was the effect of the entries to record these write-offs on Cash Flow from
Operations (ignoring the income tax effect) for 1995? Indicate the direction and amount.
______________ Increase
Robert Libby
______________ Decrease
211
No Effect
2. a) Lilly uses LIFO to account for a portion of its inventory. If it had always used FIFO to
account for all inventories, what amount would it have reported for 1995 Income from
Chap. 7
continuing operations before income taxes and cumulative effect of change in accounting
principle?
b) Did Lilly pay more or less or no difference in income taxes in 1995 as a result of using LIFO
instead of FIFO for these inventory items (circle one)?
Robert Libby
212
No difference in taxes
3. If Lilly reduced the useful lives of some equipment for book purposes only in 1994:
Chap. 8
a) What would be the effect on 1994 net income before taxes (circle one)?
Increase
Decrease
No Effect
b) What would be the effect on 1994 cash flow from operations (circle one)?
Increase
Robert Libby
Decrease
No Effect
213
$6,763.8
$5,711.6
$5,198.5
1,885.7
1,042.3
1,854.0
1,679.7
838.7
58.4
1,398.3
1,448.0
755.0
1,332.4
286.3
(70.1)
------4,998.2
-------
66.0
103.8
(131.9)
-----4,013.0
-------
1,032.6
70.6
(102.9)
-----4,535.7
-------
1,765.6
1,698.6
662.8
459.0
-------
Net income.......................
513.5
-------
1,185.1
984.3
-------
101.0
-------
198.0
-------
464.8
26.3
-------
2,290.9
1,286.1
491.1
-------
------
(10.9)
------
$2,290.9
=======
$1,286.1
=======
$480.2
=====
Robert Libby
214
December 31
1995
1994
------------------------------------------------------------Assets
Current Assets
Cash and cash equivalents..........
$ 999.5
Short-term investments.............
84.6
Accounts receivable, net of allowances of
$55.1 (1995) and $46.6 (1994)....
1,520.5
Other receivables..................
287.9
Inventories (Note 1)...............
839.6
Deferred income taxes (Note 10)....
259.2
Prepaid expenses...................
147.3
------Total current assets............
4,138.6
Other Assets
Prepaid retirement (Note 11).......
Investments (Note 6)...............
Goodwill and other intangibles, net of
allowances for amortization of $192.2
(1995) and $326.2 (1994) (Note 2)
Sundry...................................
215
536.9
209.8
1,550.2
284.4
968.9
245.0
167.1
-----3,962.3
484.2
573.8
411.9
464.1
4,105.2
871.4
------6,034.6
4,411.5
846.1
------6,133.6
4,239.3
-------
$14,412.5
========
Robert Libby
4,411.5
-------
$14,507.4
========
December 31
1995
1994
---------------------------------------------------------------Liabilities and Shareholders' Equity
Current Liabilities
Short-term borrowings (Note 7)
Accounts payable
Employee compensation
Dividends payable
Income taxes payable (Note 10)
Other liabilities
Total current liabilities
Other Liabilities
Long-term debt (Note 7)
Deferred income taxes (Note 10)
Retiree medical benefit obligation
(Note 11)
Other noncurrent liabilities
$1,908.8
1,018.0
316.0
189.1
660.5
874.6
------4,967.0
$2,724.4
878.2
304.6
188.8
508.4
1,065.1
------5,669.5
2,592.9
295.5
2,125.8
188.9
147.8
976.7
------4,012.9
170.5
997.1
------3,482.3
355.6
418.3
6,484.3
(199.5)
(0.6)
------7,058.1
183.0
421.7
5,062.1
(218.2)
(38.0)
------5,410.6
1,625.5
55.0
-------------5,432.6
5,355.6
-------------$14,412.5 $14,507.4
======== ========
Robert Libby
216
Notes
Inventories: The company states all its inventories at the
lower of cost or market. The company uses the last-in, firstout (LIFO) method for substantially all its inventories
located in the continental United States, or approximately 54
percent of its total inventories.
Other inventories are
valued by the first-in, first-out (FIFO) method. Inventories
at December 31 consisted of the following:
Finished products
Work in process
Raw materials and supplies
Robert Libby
217
1995
---273.8
446.4
154.0
----874.2
34.6
----839.6
=====
1994
---$ 288.0
515.1
239.0
------1,042.1
73.2
------$ 968.9
=======
Name ____Solution____________
Eli Lilly is engaged in the discovery, development, manufacture, and sale of products and
the provision of services in the Life Sciences industry. Its 1995 and 1994 Balance Sheets, 1995
Statement of Income, and selected notes are presented on the following pages. Treat each item
below independently. Watch the dates on the statements. All numbers in the statements and in
the questions are in $millions.
1. a) Bad debt expense was $28 during 1995. What was the amount of write-offs of bad debts in
1995? There were no reinstatements.
writeoffs
Allow. for DA
46.6beginning bal.
19.5
28Bad debt exp
55.1ending bal.
b) What was the effect of the entries to record these write-offs on Cash Flow from
Operations (ignoring the income tax effect) for 1995? Indicate the direction and amount.
______________ Increase
______________ Decrease
Robert Libby
218
No Effect
19.5
19.5
2. a) Lilly uses LIFO to account for a portion of its inventory. If it had always used FIFO to
account for all inventories, what amount would it have reported for 1995 Income from
continuing operations before income taxes and cumulative effect of change in accounting
principle?
73.2
34.6
38.6
1765.6
-38.6
1727.0
b) Did Lilly pay more or less or no difference in income taxes in 1995 as a result of using LIFO
instead of FIFO for these inventory items (circle one)?
No difference in taxes
Robert Libby
219
3. If Lilly reduced the useful lives of some equipment for book purposes only in 1994:
b) What would be the effect on 1994 net income before taxes (circle one)?
Increase
Decrease
No Effect
c) What would be the effect on 1994 cash flow from operations (circle one)?
Increase
Decrease
No Effect
Robert Libby
220
10
Practice Quiz 2s
Fall 2003 (Chapters 6, 7, 8, 9, 10)
Fall 2008 (Chapters 7, 8, 9, 10)
Robert Libby
221
Robert Libby
222
Name _____________________
This quiz contains 4 pages. Peet's Coffee & Tea, Inc. is a specialty coffee roaster and marketer of
branded fresh roasted whole bean coffee. Its Income Statement and Statement of Cash Flows for
the year ended December 31, 2002 and selected notes are presented on the following pages.
Treat each item below independently. Watch the dates on the statements. Like the statements, all
numbers in the problem are in thousands of dollars.
1. Assume that Peets adjusts the books at the end of each year. What adjusting journal entry for
bad debt expense did Peets record on December 31, 2002?
2. What was the net book value of property and equipment sold during 2002?
Robert Libby
223
3. Assume that the following bond was issued on January 1, 2002. The bond has a face value of
$500, a coupon rate of 6% paid semiannually, and a maturity date of December 31, 2005. The
market rate on the date of issuance was 5%. What would be the net book value of the bond on
December 31, 2002 after the interest payment was recorded?
Robert Libby
U/S O/S NE
U/S O/S NE
c) Non-current assets
on Dec. 31, 2002
U/S O/S NE
d) Shareholders equity
on Dec. 31, 2002
U/S O/S NE
224
Robert Libby
225
-4,657
-5,251
1,543
1,274
406
11
-(1,956)
(2,062)
(211)
(1,530)
4,419
$11,802
-(9,316)
17
(35)
(27,875)
$(37,226)
-46,258
(2,484)
(1,082)
44,862
$42,378
16,954
2,718
19,672
104,073
-48,146
33,221
4,554
4,568
6,732
$97,221
6,852
660
(120)
$7,392
2,735
$4,657
Selected Notes
A summary of the allowance for
doubtful accounts is as follows (in
thousands)
BALANCE AT
BEGINNING
OF PERIOD
Allowance for doubtful accounts:
Year ended December 31, 2000
Year ended December 31, 2001
Year ended December 31, 2002
Robert Libby
$61
69
58
226
ADDITIONS
CHARGES TO
EXPENSE
$23
30
162
WRITEOFFS
$15
41
145
BALANCE
AT END OF
PERIOD
$69
58
75
Name ____Solution___________
This quiz contains 4 pages. Peet's Coffee & Tea, Inc. is a specialty coffee roaster and marketer of
branded fresh roasted whole bean coffee. Its Income Statement and Statement of Cash Flows for
the year ended December 31, 2002 and selected notes are presented on the following pages.
Treat each item below independently. Watch the dates on the statements. Like the statements, all
numbers in the problem are in thousands of dollars.
1. What adjusting journal entry for bad debt expense did Peets record on December 31, 2002?
162
162
Robert Libby
U/S O/S NE
c) Non-current assets
on Dec. 31, 2002
d) Shareholders equity
on Dec. 31, 2002
U/S O/S NE
227
U/S O/S NE
U/S O/S NE
Robert Libby
228
Maytag was a major manufacturer of home appliances. Its partial balance sheet and selected
notes are presented on the following pages. Treat each item below independently and ignore
taxes. Watch the dates on the statements. Like the statements, all numbers are in thousands of
dollars.
Required:
Complete the following in the space provided.
1) Assume that no interest was accrued or prepaid. What entry did Maytag make for interest
paid in 2002?
2) Assume that the companys long-term debt includes $100 face value of 10% semiannual
Bonds due December 31, 2002 that had been issued on January 1, 1996 when the
effective market rate was 9.5%. The prevailing market rate for similar obligations on
December 31, 1998 was 11%. What was the book value of the bonds on December 31,
1998?
Robert Libby
229
3) How much higher or lower would Net Income Before Income Taxes have been at the end of
2002 had Maytag used FIFO to value all of its inventory? (Fill in the blank and circle
the appropriate direction.)
___________________
higher
lower
4) Assume that at the beginning of 2002, Maytag entered into new 5-year capital leases. They
incorrectly accounted for these capital leases as operating leases. What would be the
effects on each of the following?
a) Income before income
taxes for the year 2002
U/S O/S NE
b) Non-current assets
at year end 2002
U/S O/S NE
c) Non-current liabilities
at year end 2002
U/S O/S NE
Robert Libby
230
December 31
2002
2001
In thousands,
except share data
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts (2002$24,451;
2001$24,121)
Inventories
Deferred income taxes
Other current assets
Discontinued current assets
Total current assets
Noncurrent assets
Deferred income taxes
Prepaid pension cost
Intangible pension asset
Goodwill, less allowance for amortization (2002$120,929;
2001$120,929)
Other intangibles, less allowance for amortization (2002$3,574;
2001$2,466)
Other noncurrent assets
Discontinued noncurrent assets
8,106
$ 109,370
586,447
468,433
66,911
116,803
76,899
618,101
447,866
63,557
40,750
89,900
1,323,599
1,369,544
190,726
1,677
79,139
202,867
1,532
101,915
280,952
260,401
35,573
65,270
61,205
36,508
62,548
60,001
714,542
725,772
24,532
383,146
1,992,357
94,873
20,854
352,447
1,812,446
146,335
2,494,908
1,428,800
2,332,082
1,296,347
1,066,108
1,035,735
$3,104,249
$3,131,051
Total assets
Robert Libby
231
Inventories
Inventories consisted of the following:
December 31
Raw materials
Work in process
Finished goods
Supplies
Total FIFO cost
Less excess of FIFO cost over LIFO
Inventories
2002
2001
In thousands
71,563 $
62,587
51,919
76,524
422,309
382,925
8,736
9,659
554,527
531,695
86,094
83,829
468,433 $
447,866
Inventory costs are determined by the last-in, first-out (LIFO) method for approximately 92 percent and 91
percent of the Companys inventories at December 31, 2002 and 2001, respectively.
Long-Term Debt
Long-term debt consisted of the following:
December 31
2002
2001
In thousands
Omitted
934,079
195,312
$ 738,767
1,065,651
133,586
$ 932,065
$68.2 million of the $652.2 medium-term notes grant the holders the right to require the Company to
repurchase all or any portion of these notes at 100 percent of the principal amount thereof, together with
accrued interest, following the occurrence of both a change of Company control and a credit rating
decline to below investment grade.
Interest paid during 2002, 2001 and 2000 was $72.5 million, $70.1 million and $66.1 million,
respectively. When applicable, the Company capitalizes interest incurred on funds used to construct
property, plant and equipment. Interest capitalized during 2002 and 2001 was $1.1 million and $1.1
million, respectively and was not significant in 2000.
The aggregate maturities of long-term debt in each of the next five years and thereafter are as follows (in
thousands): 2003$195,312; 2004$25,940; 2005$3,928; 2006$420,670; 2007$8,000;
thereafter$280,229.
Robert Libby
232
Maytag was a major manufacturer of home appliances. Its partial balance sheet and selected
notes are presented on the following pages. Treat each item below independently and ignore
taxes. Watch the dates on the statements. Like the statements, all numbers are in thousands of
dollars.
Required:
Complete the following in the space provided.
1) Assume that no interest was accrued or prepaid. What entry did Maytag make for interest
paid in 2002?
(LTD note in paragraph form)
Interest expense (E)
71.4
Plant and equipment or Const. in Prog. (A) 1.1
Cash (A)
72.5
2) Assume that the companys long-term debt includes $100 face value of 10% semiannual
Bonds due December 31, 2002 that had been issued on January 1, 1996 when the
effective market rate was 9.5%. The prevailing market rate for similar obligations on
December 31, 1998 was 11%. What was the book value of the bonds on December 31,
1998?
N=8, I=4.75, PMT=5,000, FV=100,000; PV=101,632 (or 101.632)
(there are 4 years left on December 31, 1998 and semiannual, so N = 8)
3) How much higher or lower would Net Income Before Income Taxes have been at the end of
2002 had Maytag used FIFO to value all of its inventory? (Fill in the blank and circle
the appropriate direction.)
_______________$2,265____
higher
lower
U/S O/S NE
b) Non-current assets
at year end 2002
U/S O/S NE
c) Non-current liabilities
at year end 2002
U/S O/S NE
Robert Libby
233
Robert Libby
234
235
ROBERT LIBBY
Robert Libby
236
Final Examination
NCC 500
FINANCIAL ACCOUNTING
Fall 2003
NAME: ___________________________________
Instructions:
This open book examination consists of two parts with multiple questions. (Be sure that your
examination contains 11 pages, including this page.) All questions are based on the information
in the financial statements and notes packet you were given. Questions can be worked in any
order. For partial credit, please show all calculations and state any assumptions you make.
Record your answers on the exam in the space provided. You may use whatever books, notes,
and calculators you wish. You have 180 minutes to complete this exam.
Please read and sign the following statement:
Academic integrity is expected of all students of Cornell University at all times, whether
in the presence or absence of members of the faculty.
Understanding this, I declare I shall not give, use, or receive unauthorized aid in this
examination.
__________________________________
Signature
Points
Assigned
Suggested
Times
Problem I Brunswick
72
90 minutes
Problem II Starbucks
48
60 minutes
Review
30 minutes
120
Robert Libby
237
180 minutes
Problem I Brunswick
Answer the following questions using the attached financial statements and selected footnotes
from Brunswicks Annual Report. Brunswick is a leading manufacturer of powerboats and other
recreational equipment. Before answering the questions, take a few minutes to review the
financial statements and footnotes. Familiarity with the available information will likely save
you some time and mistakes. Note that all dollar amounts in the statements and problems are
in millions ($000,000). Treat each question independently and watch the dates on the
statements. The year 2002 refers to the fiscal year ended December 31, 2002.
1. What was the journal entry recorded for aggregate write-offs of bad debts during 2002?
Robert Libby
238
3. (a) What would the Retained Earnings on December 31, 2002 have been had Brunswick
always used FIFO for all of its inventory? Assume a 35% tax rate.
(b) What would Inventory on December 31, 2002 have been had Brunwick used FIFO for all
of its inventory?
Robert Libby
239
5. Had all of Brunswicks operating leases been accounted for as capital leases, what would
have been the amount reported as the non-current liability Capital lease liability less current
maturities at the end of 2002? Assume that the appropriate interest rate is 6%.
Robert Libby
240
6. (a) Assume that Brunswicks Notes, 6.75% due 2006 have a maturity date of December 31
and pay interest annually on December 31. What was the market interest rate on these notes
on the date of issuance? Round to two decimal places.
(c) If these these notes were retired when the market price was 255 on December 31, 2004
(immediately after the 2004 interest payment), what would be the effect on (indicate amount
and direction and ignore taxes):
Net income after extraordinary items__________ increase decrease
Cash flow from operations
Robert Libby
241
decrease
no effect
no effect
no effect
7. What was the average cost per share of the total Treasury stock balance on December 31,
2002?
8. What journal entry did Brunswick record for the issuance of shares for Compensation plans
and other for 2002?
Robert Libby
242
9. What end of period adjusting entry did Brunswick make to adjust securities available for sale
to market for 2002?
10. What was the amount of Goodwill added to the balance sheet as a result of acquisitions
during 2002?
Robert Libby
243
Problem II Starbucks
Answer the following questions using the attached financial statements and selected footnotes
from Starbucks Annual Report. Before answering the questions, take a few minutes to review
the financial statements and footnotes. Familiarity with the available information will likely save
you some time and mistakes. Note that all dollar amounts in the statements and problems are
in thousands ($000). Treat each question independently and watch the dates on the statements.
The year 2002 refers to the fiscal year ended September 29, 2002.
1. In the fiscal 2000 financial statements, what was the number of shares listed as
outstanding on Starbucks balance sheet?
2. What was the net book value of the equity method investments sold during 2002?
Robert Libby
244
3. What journal entries did Starbucks make related to equity method investments during 2002
for:
(a) Income from equity investees?
4. If the company did the following in the current year, what would be the most likely effect on
each of the following for the current year? Ignore taxes. (Circle increase, decrease, or no
effect.)
(a) Record a write-down of inventory to lower of cost or market.
Net income
increase
decrease
no effect
increase
decrease
no effect
Robert Libby
245
increase
decrease
no effect
increase
decrease
no effect
increase
decrease
no effect
increase
decrease
no effect
Robert Libby
246
10
5. During 2002, Starbucks recorded wages paid to office workers by making the following
entry:
Work-in-process inventory
Cash
By the end of 2002, the goods had been sold. No additional adjustments had been made.
What would be the effect on each of the following?
a) Net income for 2002
U/S O/S NE
b) Current assets
at year end 2002
U/S O/S NE
c) Stockholders equity
at year end 2002
U/S O/S NE
U/S O/S NE
6. During 2001, Starbucks recorded interest on debt used to finance construction of plant and
equipment by debiting Interest expense and crediting Cash. The plant and equipment
was placed in service January 1, 2002 and was expected to have a useful life of 10 years. No
additional adjustments had been made. What would be the effect on each of the following
(watch the dates)?
a) Cash flow from
U/S O/S NE
investing activities for the year 2001
Robert Libby
U/S O/S NE
c) Non-current assets
at year end 2002
U/S O/S NE
d) Shareholders equity
at year end 2002
U/S O/S NE
247
Final Examination
NCC 500 Financial Accounting
Fall 2003
Robert Libby
248
BRUNSWICK
BRUNSWICK CORP
Consolidated Statements of Income
In Millions Except Per Share Amounts For Period Ended Dec 31, 2002
NET SALES
Cost of sales
Selling, general and administrative expense
Research and development expense
Unusual charges
OPERATING EARNINGS
Interest expense
Other income (expense)
EARNINGS BEFORE INCOME TAXES
Income tax provision
EARNINGS FROM CONTINUING OPERATIONS
Cumulative effect of change in accounting principle, net of tax
NET EARNINGS (LOSS)
Robert Libby
249
3711.9
2852.0
560.5
102.8
-196.6
(43.3)
8.3
161.6
58.1
103.5
(25.1)
78.4
BRUNSWICK
BRUNSWICK CORP
Consolidated Statements of Cash Flows
31-Dec-02
In Millions For Period Ended Dec 31, 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)
Depreciation and amortization
Change in accounting principle, net of tax
Changes in noncash current assets and current liabilities
Change in accounts and notes receivable
Change in inventory
Change in prepaid expenses
Change in accounts payable
Change in accrued expense
Income taxes
Antitrust litigation settlement payments
Other, net
NET CASH PROVIDED BY CONTINUING OPERATIONS
NET CASH PROVIDED BY DISCONTINUED OPERATIONS
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
Investments
Acquisitions of businesses, net of debt and cash acquired
Proceeds on the sale of property, plant and equipment
Other, net
NET CASH USED FOR CONTINUING OPERATIONS
NET CASH PROVIDED BY DISCONTINUED OPERATIONS
NET CASH USED FOR INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net issuances (repayments) of commercial paper and other short-term debt
Payments of long-term debt including current maturities
Cash dividends paid
Stock repurchases
Stock options exercised
NET CASH USED FOR FINANCING ACTIVITIES
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at January 1
CASH AND CASH EQUIVALENTS AT DECEMBER 31
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid
Income taxes paid (received), net
Treasury stock issued for compensation plans and other
Robert Libby
250
12/31/02
-78.4
148.4
25.1
-(35.1)
35.1
(9.7)
71.0
29.5
64.3
(0.2)
6.2
413.0
-413.0
-(112.6)
(8.9)
(21.2)
13.2
(0.2)
(129.7)
-(129.7)
-(9.4)
(26.2)
(45.1)
-40.3
(40.4)
242.9
108.5
351.4
-43.3
(6.2)
56.0
BRUNSWICK
BRUNSWICK CORP
Consolidated Balance Sheet
In Millions For Period Ended Dec 31, 2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost, which approximates market
Accounts and notes receivable, less allowances of $31.8 and $26.1
Inventories
Finished goods
Work-in-process
Raw materials
Net inventories
Prepaid income taxes
Prepaid expenses
Income tax refunds receivable
CURRENT ASSETS
PROPERTY
Land
Buildings and improvements
Equipment
Total land, buildings and improvements and equipment
Accumulated depreciation
Net land, buildings and improvements and equipment
Unamortized product tooling costs
NET PROPERTY
OTHER ASSETS
Goodwill
Other intangibles
Investments
Other long-term assets
OTHER ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Short-term debt, including current maturities of long term debt
Accounts payable
Accrued expenses
CURRENT LIABILITIES
LONG-TERM DEBT
Notes, mortgages and debentures
DEFERRED ITEMS
Income taxes
Postretirement and postemployment benefits
Other
DEFERRED ITEMS
COMMON SHAREHOLDERS' EQUITY
102,538,000 shares
Additional paid-in capital
Retained earnings
Treasury stock, at cost: 12,377,000 and 14,739,000 shares
Unamortized ESOP expense and other
Accumulated other comprehensive loss:
Foreign currency translation
Minimum pension liability
Unrealized investment gains (losses)
Unrealized losses on derivatives
Total accumulated other comprehensive loss
COMMON SHAREHOLDERS' EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
Robert Libby
251
12/31/02
--
12/31/01
--
351.4
401.4
108.5
361.9
--
--
272.5
201.6
72.8
546.9
305.1
49.5
5.9
1660.2
-68.3
478.2
998.2
1544.7
(871.0)
673.7
119.0
792.7
-452.8
117.5
95.4
288.5
954.2
3407.1
-28.9
291.2
685.5
1005.6
-589.5
-144.1
399.3
166.8
710.2
-76.9
308.9
1112.7
(228.7)
(22.2)
-(9.9)
(136.5)
2.7
(2.1)
(145.8)
1101.8
3407.1
317.2
180.9
59.3
557.4
307.5
38.9
26.7
1400.9
-68.4
460.0
964.8
1493.2
(803.8)
689.4
116.2
805.6
-474.4
128.9
80.4
267.3
951.0
3157.5
-40.0
214.5
648.2
902.7
-600.2
-185.2
216.1
142.4
543.7
-76.9
316.2
1079.4
(289.8)
(27.1)
-(20.0)
(20.8)
(1.7)
(2.2)
(44.7)
1110.9
3157.5
BRUNSWICK
BRUNSWICK CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
ACCUMULATED
ADDITIONAL
OTHER
COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE
STOCK CAPITAL EARNINGS STOCK
INCOME (LOSS)
TOTAL
BALANCE, DECEMBER 31, 1999...
$76.90 $265.00 $1,181.50
($214.00)
($9.20) $1,300.20
COMPREHENSIVE INCOME
Net loss...................
-(95.8)
--(95.8)
Currency translation adjustments..............
---(8.3)
(8.3)
Unrealized losses on investments..............
---(3.9)
(3.9)
Minimum pension liability adjustment...............
---(6.0)
(6.0)
Total comprehensive income -- 2000..................
-(95.8)
-(18.2)
(114.0)
Stock repurchased............
--(87.1)
-(87.1)
Dividends ($0.50 per common share).................
-(44.3)
--(44.3)
Compensation plans and other......................
-7.6
-4.7
-12.3
BALANCE, DECEMBER 31, 2000...
$76.9
$272.6
$1,041.4
($296.4)
($27.4) $1,067.1
COMPREHENSIVE INCOME
Net earnings...............
-81.8
--81.8
Currency translation adjustments..............
---(5.0)
(5.0)
Unrealized gains on investments..............
---4.4
4.4
Unrealized losses on derivative instruments...
---(2.1)
(2.1)
Minimum pension liability adjustment...............
---(14.6)
(14.6)
Total comprehensive income -- 2001..................
-81.8
-(17.3)
64.5
Dividends ($0.50 per common share).................
-(43.8)
--(43.8)
Compensation plans and other......................
-16.5
-6.6
-23.1
BALANCE, DECEMBER 31, 2001...
$76.9
$289.1
$1,079.4
($289.8)
($44.7) $1,110.9
COMPREHENSIVE INCOME
Net earnings...............
-78.4
--78.4
Currency translation adjustments..............
---10.1
10.1
Unrealized gains on investments..............
---4.4
4.4
Unrealized gains on derivative instruments...
---0.1
0.1
Minimum pension liability adjustment...............
---(115.7)
(115.7)
Total comprehensive income -- 2002..................
-78.4
-(101.1)
(22.7)
Dividends ($0.50 per common share).................
-(45.1)
--(45.1)
Compensation plans and other......................
-(2.4)
-61.1
-58.7
BALANCE, DECEMBER 31, 2002...
$76.9
$286.7
$1,112.7
($228.7)
($145.8) $1,101.8
Robert Libby
252
BRUNSWICK
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
2002
-----
2001
-----
2000
----
$ 1.5
(2.0)
----$(0.5)
=====
$16.9
(4.2)
----$12.7
=====
$7.2
(0.1)
---$7.1
====
The gains on the sale of property in 2001 included gains recognized on the
sale of a marine engine testing facility for $10.6 million. Gains on the
divestiture of certain bowling centers were $2.7 million and $6.0 million in
2001 and 2000, respectively.
Goodwill and Other Intangibles. Goodwill and other intangible assets
generally result from business acquisitions. The excess of cost over net assets
of businesses acquired is recorded as goodwill.
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Other Intangible Assets," which requires that, effective
January 1, 2002, goodwill and certain other intangible assets deemed to have an
indefinite useful life are no longer amortized. SFAS No. 142 does not require
Robert Libby
253
BRUNSWICK
retroactive restatement for all periods presented; however, the comparative pro
forma information below for 2001 and 2000 assumes that SFAS No. 142 was in
effect beginning January 1, 2000.
PRO FORMA INFORMATION
FOR THE YEARS ENDED
DECEMBER 31,
---------------------2002
2001
2000
-------------(IN MILLIONS,
EXCEPT PER SHARE DATA)
Reported net earnings (loss)................................
Goodwill and indefinite-lived intangible amortization.......
Adjusted net earnings (loss)................................
BASIC EARNINGS PER COMMON SHARE:
Reported net earnings (loss)................................
Goodwill and indefinite-lived intangible amortization.......
Adjusted net earnings (loss)................................
DILUTED EARNINGS PER COMMON SHARE:
Reported net earnings (loss)................................
Goodwill and indefinite-lived intangible amortization.......
Adjusted net earnings (loss)................................
$78.4
-----$78.4
=====
$81.8
10.8
----$92.6
=====
$(95.8)
9.6
-----$(86.2)
======
$0.87
-----$0.87
=====
$0.93
0.12
----$1.05
=====
$(1.08)
0.11
-----$(0.97)
======
$0.86
-----$0.86
=====
$0.93
0.12
----$1.05
=====
$(1.08)
0.11
-----$(0.97)
======
Under SFAS No. 142, while amortization of goodwill and certain other
intangible assets is no longer permitted, these accounts must be reviewed
annually for impairment. The impairment test for goodwill is a two-step process.
The first step is to identify when goodwill impairment has occurred by comparing
the fair value of a reporting unit with its carrying amount, including goodwill.
If the fair value of a reporting unit exceeds its carrying amount, goodwill of
the reporting unit is not considered impaired. If the carrying amount of the
reporting unit exceeds its fair value, the second step of the goodwill test
should be performed to measure the amount of the impairment loss, if any. In
this second step, the implied fair value of the reporting unit's goodwill is
compared with the carrying amount of the goodwill. If the carrying amount of the
reporting unit's goodwill exceeds the implied fair value of that goodwill, an
impairment loss should be recognized in an amount equal to that excess, not to
exceed the carrying amount of the goodwill.
The Company completed both steps of the process described above in the
second quarter of 2002 and recorded a one-time, non-cash charge of $29.8 million
pre-tax to reduce the carrying amount of its goodwill effective January 1, 2002.
Such charge is reflected as a cumulative effect of change in accounting principle
in the accompanying Consolidated Statements of Income. In calculating the
impairment charge, the fair value of the impaired reporting units underlying the
segments was estimated using a discounted cash flow methodology.
Investments. The Company accounts for its long-term investments that
represent less than 20 percent ownership using SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The Company has investments
in certain equity securities that have readily determinable market values and
are being accounted for as Available-for-Sale equity investments in accordance
with SFAS No. 115. Therefore, these investments are recorded at market value
with changes reflected in other comprehensive income, a component of
Robert Libby
254
BRUNSWICK
shareholders' equity, on an after-tax basis.
Other investments for which the Company does not have the ability to
exercise significant influence and for which there is not a readily determinable
market value are accounted for under the cost method of accounting. The Company
periodically evaluates the carrying value of its investments and, at December
31, 2002 and 2001, such investments were recorded at the lower of cost or fair
value.
For investments in which the Company owns or controls from 20 percent to 50
percent of the voting shares, the equity method of accounting is used. The
Company's share of net earnings or losses from equity method investments is
outlined in NOTE 17, INVESTMENTS, and is included in the Consolidated Statements
of Income.
9.
ACCRUED EXPENSES
Accrued expenses at December 31 were as follows (in millions):
2002
-----Accrued compensation and benefit plans...................... $158.9
Product warranties..........................................
139.6
Dealer allowances and discounts.............................
111.3
Insurance reserves..........................................
71.3
Environmental reserves......................................
61.7
Other.......................................................
142.7
-----Total accrued expenses.................................... $685.5
2001
-----$127.2
138.7
114.3
68.0
62.6
137.4
-----$648.2
10.
DEBT
Short-term debt at December 31 consisted of the following (in millions):
2002
2001
----------Notes payable............................................... $ 4.1
$ 13.6
Current maturities of long-term debt........................
24.8
26.4
----------Total short-term debt..................................... $ 28.9
$ 40.0
======
======
Long-term debt at December 31 consisted of the following (in millions):
2002
2001
----------Notes, 6.75% due 2006, net of discount of $0.9 and $1.1..... $249.1
$248.9
Notes, 7.125% due 2027, net of discount of $1.2.............
198.8
198.8
Debentures, 7.375% due 2023, net of discount of $0.6 and
$0.7......................................................
124.4
124.3
Guaranteed ESOP debt, 8.13% payable through 2004............
15.5
24.9
Notes, 3.17% to 4.50% payable through 2004..................
14.1
29.3
Fair value adjustments and other............................
12.4
0.4
----------614.3
626.6
Current maturities..........................................
(24.8)
(26.4)
----------Long-term debt.............................................. $589.5
$600.2
======
======
Scheduled maturities
2004...................................................... $ 5.6
2005......................................................
0.1
2006......................................................
260.6
2007......................................................
-Thereafter................................................
323.2
-----Total................................................ $589.5
======
Robert Libby
255
BRUNSWICK
15.
LEASES
The Company has various lease agreements for offices, branches, factories,
distribution and service facilities, certain Company-operated bowling centers,
fitness retail locations, and certain personal property. The longest of these
obligations extends through 2025. Most leases contain renewal options and some
contain purchase options. Many leases for Company-operated bowling centers
contain escalation clauses, and many provide for contingent rentals based on
percentages of gross revenue. No leases contain restrictions on the Company's
activities concerning dividends, additional debt or further leasing. Rent
expense consisted of the following (in millions):
Basic expense...............................................
Contingent expense..........................................
Sublease income.............................................
Rent expense, net...........................................
2002
----$42.5
1.9
(1.1)
----$43.3
=====
2001
----$40.3
1.0
(1.4)
----$39.9
=====
2000
----$37.5
0.3
(2.1)
----$35.7
=====
Robert Libby
256
$ 28.7
23.4
19.8
15.8
11.8
35.4
-----$134.9
======
BRUNSWICK
Robert Libby
BALANCE AT
BEGINNING
CHARGES TO
OF PERIOD
WRITE-OFFS
RECOVERIES
OTHER
YEAR END
----------
---------------
----------
----------
-----
----------
$26.1
=====
$21.2
=====
$18.4
=====
$10.8
=====
$13.7
=====
$11.4
=====
$ (6.6)
======
$(13.1)
======
$ (8.9)
======
$0.8
====
$0.5
====
$1.0
====
$(0.7)
=====
$ 3.8
=====
$(0.7)
=====
257
BALANCE
$31.8
=====
$26.1
=====
$21.2
=====
STARBUCKS
STARBUCKS CORP
Consolidated Statements of Income
29-Sep-02
In Thousands Except Per Share Amounts For Period Ended Sep 29, 2002
Net revenues:
Retail
Specialty
Total net revenues
Cost of sales and related occupancy costs
Store operating expenses
Other operating expenses
Depreciation and amortization expenses
General and administrative expenses
Income from equity investees
Operating income
Interest and other income, net
Internet-related investment losses
Gain on sale of equity investment
Earnings before income taxes
Income taxes
Net earnings
Net earnings per common share - basic
Net earnings per common share - diluted
Weighted average shares outstanding:
Basic
Diluted
Robert Libby
258
9/29/2002
-2,792,904
496,004
$3,288,908
1,350,011
1,121,108
127,178
205,557
202,161
35,832
$318,725
9,300
-13,361
$341,386
126,313
$215,073
0.56
0.54
-385,575
397,526
STARBUCKS
STARBUCKS CORP
Consolidated Statements of Cash Flows
In Thousands For Period Ended Sep 29, 2002
OPERATING ACTIVITIES:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
Gain on sale of equity investment
Provision for impairment and asset disposals
Deferred income taxes, net
Excess of dividends received over equity in income of investees
Tax benefit from exercise of non-qualified stock options
Cash provided/(used) by changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Accounts payable
Accrued compensation and related costs
Accrued occupancy costs
Accrued taxes
Deferred revenue
Other accrued expenses
Net cash provided by operating activities
INVESTING ACTIVITIES:
Net purchases of trading securities
Purchase of available-for-sale securities
Maturity of available-for-sale securities
Sale of available-for-sale securities
Additions to equity and other investments
Proceeds from sale of equity investment
Additions to property, plant and equipment
Additions to other assets
Net cash used by investing activities
FINANCING ACTIVITIES:
Increase/(decrease) in cash provided by checks drawn in excess of bank balances
Proceeds from sale of common stock under employee stock purchase plan
Proceeds from exercise of stock options
Principal payments on long-term debt
Repurchase of common stock
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
CASH AND CASH EQUIVALENTS:
Beginning of year
End of year
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest
Income taxes
Robert Libby
259
09/29/02
-215,073
-221,141
(13,361)
26,852
(6,088)
862
44,199
-(6,703)
(41,379)
(12,460)
5,463
24,087
15,343
(16,154)
15,321
34,022
$506,218
-(5,699)
(339,968)
78,349
144,760
(6,137)
14,843
(375,474)
(24,547)
$(513,873)
-12,908
16,191
91,276
(697)
(52,248)
$67,430
1,560
$61,335
-113,237
174,572
--303
105,339
STARBUCKS
STARBUCKS CORP
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
In thousands, except share data
---------------------------------------------------------------------------------------------------------------------------------Accumulated
Additional
Other
Common Stock
Paid-In
Retained
Comprehensive
Shares
Amount
Capital
Earnings
Income/(Loss)
Total
---------------------------------------------------------------------------------------------------------------------------------Balance, October 3, 1999
Net earnings
Unrealized holding losses, net
Translation adjustment
366,564,190
----
366
----
Comprehensive income
650,654
----
313,939
94,564
---
(3,946)
-(163)
(6,867)
961,013
94,564
(163)
(6,867)
-----------87,534
------------
Robert Libby
260
STARBUCKS
STARBUCKS CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended September 29, 2002, September 30, 2001, and October 1, 2000
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Stock Split
On April 27, 2001, the Company effected a two-for-one stock split of its $0.001
par value common stock for holders of record on March 30, 2001. All applicable
share and per-share data in these consolidated financial statements have been
restated to give effect to this stock split.
Robert Libby
261
Robert Libby
262
Part I - Brunswick
1) Allowance for doubtful accounts (XA)
6.6
Accounts receivable (A)
6.6
(-2 each account and the amount)
2) Product warranties expenses recorded
Because the accrued expenses for product warranties went up.
(-3 each)
3a) Change in Cost of Goods Sold
-85.7
Change in Cumulative NIBT
85.7
Change in taxes to date
(.35 * 85.7)
30.0
Change in Retained Earnings
(.65 * 85.7)
55.7
RE (LIFO) + 55.7 =RE (FIFO)
(-2) (-2)
1,112.7+55.7=
1168.4
(-1)
(If also use beginning inventory, -2. 1114.06)
3b) Ending Inventory Lifo
546.9 (-1)
Ending Lifo reserve
85.7 (-1 sign, amt))
Ending Inventory Fifo
632.6
6
4)
(-1) beg
transfers from WIP
(-1) end
FG Inventory
317.2
2807.3
2852.0 CGS (-2)
272.5
120
Robert Libby
i=6.86
Goodwill (A)
474.4
8.2
452.8
4.4
72
Part II - Starbucks
1) 376,315,302/ 2= 188,157,651
(-3
-3)
2) Proceeds - NBV = Gain (Loss)
14,843 - x = 13,361
NBV =
(-3)
(-3)
WIP Inventory
(-1) beg
180.9
additions to WIP
2828.0
2807.3 transfers from WIP (-2)
(-1) end
201.6
(watch for carryforward)
5) year
amount
n
PV
2004............ 23.4
2
$20.83 -1 each
2005............ 19.8
3
$16.62
2006............ 15.8
4
$12.52
2007............ 11.8
5
$8.82
2008............ 35.4
6
$24.96
$83.74
(-1 if 2003 included, -3 if 88.77)
6a) n=4, PV=249.1, FV=-250, PMT=-16.875
1,482
35,832
35,832
36694
36694
(-3 each)
-1 each
(-1.5 each )
(-1 math)
48
263
6) In 2001
P&E (A)
Interest expense (E)
In 2002
Depr. Expense (E)
Acc. Depr. (XA)
OS, OS, US, US
(-1.5 each )
Robert Libby
264
Final Examination
NCC 500
FINANCIAL ACCOUNTING
Summer 2005
NAME: ___________________________________
Instructions:
This open book examination consists of two parts with multiple questions. (Be sure that your
examination contains 11 pages, including this page.) All questions are based on the information
in the financial statements and notes packet you were given. Questions can be worked in any
order. For partial credit, please show all calculations and state any assumptions you make.
Record your answers on the exam in the space provided. You may use whatever books, notes,
and calculators you wish. You have 180 minutes to complete this exam.
Please read and sign the following statement:
Academic integrity is expected of all students of Cornell University at all times, whether
in the presence or absence of members of the faculty.
Understanding this, I declare I shall not give, use, or receive unauthorized aid in this
examination.
__________________________________
Signature
Points
Assigned
Suggested
Times
60
80 minutes
60
80 minutes
Review
20 minutes
120
Robert Libby
265
180 minutes
1. What was the amount of cash paid for advertising during the year ended March 31, 2002?
2. a) Was the date of issuance market rate of interest higher or lower than the coupon rate on the
companys 2003 notes (payable)? (Circle one.)
Higher
Lower
Robert Libby
266
3. a) On average, have the market interest rates for debt similar to the companys 2003 and
2008 notes and 2031 bonds (payable) risen or fallen since the issuance of the debt? (Circle
one.)
Risen
Fallen
4. What was the date of issuance market rate for the April 1, 2008 notes? These notes pay an
annual coupon (interest payment).
Robert Libby
267
5. What was the amount of the discount on the 6.5% notes payable (due April 1, 2003) that was
amortized during the year ended March 31, 2002?
6. a) What amount for Goodwill did the company record related to the July 5, 2001
acquisition of T. H. International?
b) What amount will be recorded for the amortization of this goodwill during the year ended
March 31, 2003 under the current rules?
Robert Libby
268
7. What was the total amount of intangible assets acquired during the year ended March 31,
2002?
8. If the company did the following in the current year, what would be the most likely effect on
each of the following ratios or financial statement amounts for the current year? Use
definitions from chapter 5 and the notes. Ignore taxes. (Circle increase, decrease, or no
effect.)
(a) Make an end of period adjustment to write down inventory to lower of cost or market.
Cash flow from operations
increase
decrease
no effect
increase
decrease
no effect
Robert Libby
269
(b) Paid cash in the current year for ordinary and routine maintenance on equipment. The
equipment had a remaining useful life of 4 years.
Cash flow from operations
increase
decrease
no effect
Non-current assets
increase
decrease
no effect
(c) Sold equipment which had a net book value of $10,000 for $12,000 cash on December
31.
Net income
increase
decrease
no effect
Non-current assets
increase
decrease
no effect
Robert Libby
270
2. What would Net Income have been for the year ended December, 31, 2001 had Dow
accounted for their entire inventory using FIFO? Assume a 30% tax rate.
Robert Libby
271
3. What journal entry did Dow make for the 3 for 1 stock split recorded during 2000?
4. Assume that Dow neither purchased nor sold Investments classified as available for sale
during 2001. What adjusting journal entry did Dow make at the end of 2001 related to
Investments classified as available for sale?
Robert Libby
272
5. Assuming that all sales of nonconsolidated affiliates were for book value and no
nonconsolidated affiliates paid dividends, what was the total income (loss) recognized from
nonconsolidated affiliates during 2001?
6. What was the average price per share paid for shares in treasury at the end of 2001?
Robert Libby
273
7. Assume that the company had done each of the following in preparation of its 2001
statements, and no adjustments were made. What would be the effect of each event on the
following amounts? Circle U/S for understate, O/S for overstate, or NE for no effect. Treat
each item independently and ignore income tax effects.
(a) During 2001, Dow recorded depreciation on an office building by debiting work-inprocess inventory and crediting accumulated depreciation. By December, the
goods had been sold and the sales and cost of sales had been recorded. No
additional adjustments had been made.
a) Cash flow from
operations for the year
U/S O/S NE
U/S O/S NE
c) Non-current assets
at year end
U/S O/S NE
d) Shareholders equity
at year end
U/S O/S NE
(b) During 2001, Dow realized that the useful life of certain office equipment used in the
accounting department which had an original estimated useful life of 6 years,
would only last for 5 years. No changes were made in the recording of
depreciation of this equipment for book purposes for 2001. No additional
adjustments had been made.
Robert Libby
U/S O/S NE
U/S O/S NE
c) Non-current assets
at year end
U/S O/S NE
d) Shareholders equity
at year end
U/S O/S NE
274
(c) During 2001, Dow capitalized $1 of interest paid as part of Property that should
have been recorded as interest expense. No additional adjustments had been
made.
a) Cash flow from
operations for the year
U/S O/S NE
U/S O/S NE
c) Non-current assets
at year end
U/S O/S NE
d) Shareholders equity
at year end
U/S O/S NE
8. What would be the effect of properly recording the reissuance of treasury shares for $251
cash which was $26 in excess of their repurchase on "earnings before taxes," "cash flow from
operations," and "cash flow from financing activities" for 2000? Indicate the direction ("+"
for increase, "-" for decrease, and "NE" for no effect) and amount of the effect. Ignore tax
effects.
Earnings before taxes
+___________
-_____________
NE
-_____________
NE
Robert Libby
-_____________
NE
275
Final Examination
NCC 500 Financial Accounting
Summer 2005
Robert Libby
276
Tommy Hilfiger
In Thousands
Current assets
Cash and cash equivalents
Accounts receivable
Inventories
Deferred tax and other current assets
Total current assets
Property and equipment, at cost, net of accumulated depreciation and
amortization
Intangible assets, net of accumulated amortization of $135,794 and
$101,262 respectively
Other assets
Total Assets
Current liabilities
Short-term borrowings
Current portion of long-term debt
Accounts payable
Accrued expenses and other current liabilities
Total current liabilities
Long-term debt
Deferred tax liability
Other liabilities
Commitments and contingencies
Shareholders' equity
Ordinary Shares, $.01 par value-shares authorized 150,000,000;
issued 96,031,167 and 95,169,402 respectively
Capital in excess of par value
Retained earnings
Accumulated other comprehensive income (loss)
Treasury shares, at cost: 6,192,600 Ordinary Shares
Total shareholders' equity
Total Liabilities and Shareholders' Equity
Robert Libby
277
03/31/02
-387,247
224,395
184,972
97,274
$893,888
03/31/01
-318,431
237,414
205,446
90,353
$851,644
302,937
281,682
1,390,092
7,534
$2,594,451
-62,749
698
28,980
210,270
$302,697
575,287
214,964
4,041
---
1,206,358
2,872
$2,342,556
--50,000
38,628
171,640
$260,268
529,495
202,123
2,077
---
960
598,527
956,776
2,430
(61,231)
$1,497,462
2,594,451
952
589,184
822,231
(2,543)
(61,231)
$1,348,593
2,342,556
Tommy Hilfiger
Robert Libby
278
3/31/2002
1,876,721
1,073,089
803,632
114,129
503,774
$617,903
185,729
41,177
10,062
$154,614
20,069
$134,545
-1.50
89,430
1.49
90,000
Tommy Hilfiger
Robert Libby
279
03/31/02
-134,545
-117,326
(6,771)
---29,963
51,016
(4,138)
-(15,613)
46,972
$353,300
-(96,923)
(205,061)
$(301,984)
-144,921
(155,538)
7,997
-20,120
$17,500
68,816
318,431
387,247
Tommy Hilfiger
TOMMY HILFIGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
(l)
Advertising Costs
Robert Libby
280
Tommy Hilfiger
Note 7 - Long-Term Debt
Long-term debt consists of the following:
March 31,
----------------------------2002
2001
------------------------$ 150,000
$
--
199,702
199,663
224,918
224,842
-1,365
------------575,985
(698)
-------------
154,090
-------------579,495
(50,000)
-------------
$ 575,287
=============
$ 529,495
=============
Robert Libby
281
Tommy Hilfiger
Note 9 - Income Taxes
The components of the provision for income taxes are as follows:
Fiscal Year Ended March 31,
-------------------------------2002
2001
2000
--------------------Current:
U.S. Federal .................
State and Local ..............
Non-U.S. .....................
Deferred:
U.S. Federal .................
State and Local ..............
Non-U.S. .....................
$ 3,445
(222)
23,617
------26,840
-------
$18,320
270
14,824
------33,414
-------
(3,750)
(3,021)
-------(6,771)
------$20,069
=======
12,640
(3,557)
-------9,083
------$42,497
=======
$ 92,332
25,850
16,779
------134,961
------(55,683)
(24,105)
-------(79,788)
------$55,173
=======
Robert Libby
282
6,406
38,002
11,734
5,324
--------61,466
---------
19,996
9,479
37,125
10,391
7,801
--------64,796
---------
12,740
(242,790)
19,788
(958)
--------(203,964)
(11,000)
---------
(237,129)
14,561
10,705
--------(199,123)
(3,000)
---------
(214,964)
--------$(153,498)
=========
(202,123)
--------$(137,327)
=========
DOW CHEMICAL CO
DOW CHEMICAL CO
Consolidated Balance Sheet
In Millions
Current Assets
Cash and cash equivalents
Marketable securities
Accounts receivable: Trade (net of allowance for doubtful
Receivables 2001: $123; 2000: $103)
Other
Inventories:
Finished and work in process
Materials and supplies
Deferred income tax assetscurrent
Total current assets
Investments
Investment in nonconsolidated affiliates
Other investments
Noncurrent receivables
Total investments
Property
Property
Less accumulated depreciation
Net property
Other Assets
Goodwill (net of accumulated amortization 2001: $569; 2000: $459)
Deferred income tax assets noncurrent
Deferred charges and other assets
Total other assets
Total Assets
Robert Libby
283
12/31/01
12/31/00
220
44
278
163
2,868
2,230
3,655
2,764
3,569
871
506
$10,308
3,396
817
250
$11,323
1,581
1,663
802
$4,046
2,096
2,528
674
$5,298
35,890
22,311
$13,579
34,852
21,141
$13,711
3,130
2,248
2,204
$7,582
$35,515
1,928
1,968
1,763
$5,659
$35,991
DOW CHEMICAL CO
DOW CHEMICAL CO
Consolidated Balance Sheet (cont.)
In Millions except share amounts
Current Liabilities
Notes payable
Long-term debt due within one year
Accounts payable:
Trade
Other
Income taxes payable
Deferred income tax liabilities current
Dividends payable
Accrued and other current liabilities
Total current liabilities
Long-Term Debt
Other Noncurrent Liabilities
Deferred income tax liabilities noncurrent
Pension and other postretirement benefits noncurrent
Other noncurrent obligations
Total other noncurrent liabilities
Minority Interest in Subsidiaries
Preferred Securities of Subsidiaries
Stockholders' Equity
Common stock (authorized 1,500,000,000 shares of $2.50 par value
each; issued 981,377,562)
Additional paid-in capital
Unearned ESOP shares
Retained earnings
Accumulated other comprehensive loss
Treasury stock at cost (shares 2001: 76,540,276; 2000: 84,280,041)
Net stockholders' equity
Total Liabilities and Stockholders' Equity
Robert Libby
284
12/31/01
12/31/00
1,209
408
2,519
318
2,713
926
$190
236
323
2,120
$8,125
9,266
2,975
1,594
$258
35
217
2,257
$10,173
6,613
760
2,475
3,539
$6,774
357
1,000
1,165
2,238
3,012
$6,415
450
500
2,453
2,453
(90)
11,112
(1,070)
(2,412)
$9,993
35,515
(103)
12,675
(560)
(2,625)
$11,840
35,991
DOW CHEMICAL CO
2001
------$27,805
------23,652
OMITTED
------$ (385)
Net Income
Robert Libby
285
DOW CHEMICAL CO
DOW CHEMICAL CO
Consolidated Statements of Cash Flows
In Millions For Period Ended
Operating Activities:
OMITTED
Investing Activities
Capital expenditures
Proceeds from sales of property and businesses
Acquisitions of businesses, net of cash received
Investments in nonconsolidated affiliates
Proceeds from sales of nonconsolidated affiliates
Purchases of investments
Proceeds from sales of investments
Cash used in investing activities
Financing Activities
OMITTED
Effect of Exchange Rate Changes on Cash
Summary Increase (Decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Robert Libby
286
12/31/01
12/31/00
-(1,587)
153
(2,098)
(92)
181
(2,561)
3,330
$(2,674)
--
-(1,808)
166
(857)
(186)
47
(3,074)
4,618
$(1,094)
--
(4)
$(58)
278
220
(9)
$(269)
547
278
DOW CHEMICAL CO
$818
1,635
2,453
------
165
(184)
-19
--
(103)
-13
(90)
(57)
(64)
18
(103)
12,675
(385)
-(1,162)
(16)
11,112
13,357
1,675
(1,451)
(906)
-12,675
325
(319)
6
298
27
325
(885)
(191)
(1,076)
(1,070)
(709)
(176)
(885)
(560)
Treasury Stock
Balance at beginning of year
Purchases
Issuance to employees and employee plans
Balance at end of year
(2,625)
(5)
218
(2,412)
(2,932)
(4)
311
(2,625)
$9,993
$11,840
Robert Libby
287
2000
DOW CHEMICAL CO
Inventories
The reserves required to adjust inventories from the first-in,
first-out ("FIFO") basis to the last-in, first-out ("LIFO") basis amounted
to a decrease of $146 at December 31, 2001, and a decrease of $682 at
December 31, 2000. The inventories that were valued on a LIFO basis,
principally hydrocarbon and U.S. chemicals and plastics product
inventories, represented 36 percent of the total inventories at
December 31, 2001, and 38 percent of the total inventories at December 31,
2000.
Robert Libby
288
2001
----$ 711
278
39
2000
---$705
730
24
1999
---$630
710
52
1)
1)
3) a) Risen
b) Because the market value is less than
the book value.
(if increase in rates, -2)
-3
-3
i = 6.881
5)
2) Change in beginning
Change in ending
Change in CGS
Change in NIBT
Change in tax expense
Change in NI
Net Income LIFO
Net Income FIFO
3) Additional PIC
Retained earnings
Common Stock
14,702
(-3)
(-3)
$201,839 -3
7)
beg
Purchases
end
Intangibles (gross)
1,307,620
218,266
1,525,886
beg
Purchases
end
Intangibles (net)
(-1.5 each input)
1,206,358
34,532 amort
218,266
sales
1,390,092
-3
-1.5
-1.5
(.3*536) (-1.5)
-1.5
no effect, no effect
(-3 each)
decrease; no effect
(-3 each)
12,000
682
146
536
-536
160.8
-375.2
-385
-760.2
77
14,625
5)
6
A/R (net)
beg
3,655
39 Provision for bad debts
Net Sales
27,805
28,553 Cash collections
end
2,868
(-2 each input)
increase; decrease
10,000 (-3 each)
2,000
6) 2,412,000,000 / 76,540,276 =
31.51282 (0.000032)
(-3)
(-3)
(if 31.73, -2)
7a) a) NE; b) NE; c) NE; d) NE
Depreciation expense (E)
(-1.5 each)
Cost of goods sold (E)
(b) a) NE; b) O/S; c) O/S; d) O/S
Depreciation expense (E)
Accum Depreciation (XNCA)
(-1.5 each)
(-1.5 each)
6
6
NE
(-2)
NE
(-2)
+251
(-2)(-1 for sign and amount)
Robert Libby
60
289
Robert Libby
290
Final Examination
NCC 500
FINANCIAL ACCOUNTING
Fall 2006
NAME: ___________________________________
Instructions:
This open book examination consists of multiple questions. (Be sure that your examination
contains 10 pages, including this page.) All questions are based on the information in the
financial statements and notes packet you were given. Questions can be worked in any order.
For partial credit, please show all calculations and state any assumptions you make. Record your
answers on the exam in the space provided. You may use whatever books, notes, and calculators
you wish. You have 180 minutes to complete this exam.
Please read and sign the following statement:
Academic integrity is expected of all students of Cornell University at all times, whether
in the presence or absence of members of the faculty.
Understanding this, I declare I shall not give, use, or receive unauthorized aid in this
examination.
__________________________________
Signature
Points
Assigned
Suggested
Times
120
150 minutes
Review
30 minutes
120
Robert Libby
291
180 minutes
Problem I Nabors
Answer the following questions using the attached financial statements and selected footnotes
from the Nabors Industries Ltd. Annual Report. Nabors is the largest oil and gas land drilling
contractor in the world. Before answering the questions, take a few minutes to review the
financial statements and footnotes. Familiarity with the available information will likely save
you some time and mistakes. Note that all dollar amounts in the statements and problems are
in thousands ($000). Treat each question independently and watch the dates on the statements.
The year 2005 refers to the year ended December 31, 2005.
1. Were new deferred revenues recorded more than or less than deferred revenues recognized
during 2005? How much was the difference? (Indicate the amount and circle one
direction.) (6 points)
New deferred revenues recorded were _______________ more
revenues recognized during 2005.
(less)
than deferred
2. (a)What was the effect of book depreciation and amortization expense on cash flow from
operations for 2005? (Check one.) (3 points)
Increase
Decrease
No effect
(b) What was the effect of tax depreciation and amortization expense on cash flow from
operations for 2005? (Check one.) (3 points)
Increase
Robert Libby
Decrease
292
No effect
3. What journal entries did Nabors make related to earnings and dividends from affiliated
companies accounted for under the equity method in 2005? (8 points)
4. Assume that their interest rate for similar obligations is 10%. If Naborss capitalized its noncancelable operating lease obligations, what would be the amount of total current liabilities
reported on the balance sheet at the end of 2005? (8 points)
Robert Libby
293
5. Assume that Nabors failed to record the end of period adjustment for accrued compensation
at the end of 2005. What is the most likely effect of this mistake on the following amounts?
Circle U/S if the amount is understated, O/S if overstated, or NE if there is no effect. (6
points)
(a)
Working capital
(b)
(c)
(12/31/2005)
U/S
O/S
NE
U/S
O/S
NE
U/S
O/S
NE
Net income
(year ended 12/31/2005)
6. On December 13, 2005, Nabors Board of Directors approved a two-for-one stock split on
common shares to be effectuated in the form of a stock dividend on April 17, 2006 to
shareholders of record on March 31, 2006. What journal entry will most likely be made in
2006 for this transaction? Assume that, on the date the split is recorded, the same number of
shares are issued and outstanding as on December 31, 2005. (6 points)
Robert Libby
294
7. By how much did the acquisition of businesses affect the following during 2005? (Circle the
direction and fill in the amount.) (8 points)
a) Total assets
Increase
Decrease
No Effect
b) Total liabilities
Increase
Decrease
No Effect
8. What was the accumulated depreciation and amortization on property, plant and equipment
disposed of during 2005? All depreciation and amortization relates to property, plant and
equipment. (7 points)
Robert Libby
295
9. This question relates to the 4.875% senior notes. Assume the notes were issued on January 1
and require annual interest payments on December 31.
What was the market interest rate on the date of issuance? (4 points)
10. This question relates to the 5.375% senior notes. Assume the notes were issued on January 1
and require annual interest payments on December 31.
(a) Has the market rate of interest increased, decreased or stayed the same since issuance?
(Circle one). (2 points)
Increased
Decreased
Same
(c) What was the market rate of interest on these notes on December 31, 2005? (4 points)
(d) What journal entry would Nabors have made if they repurchased the notes for market
value on December 31, 2005, after the 2005 interest payment was made? (7 points)
Robert Libby
296
11. What was the journal entry made for the issuance of common shares during 2005? (9 points)
12. If the company did the following in the current year, what would be the most likely effect on
each of the following ratios or financial statement amounts for the current year 2005? Use
definitions from chapter 5 and the notes. Ignore taxes. (Circle increase, decrease, or no
effect.) (6 points)
(a) Repurchased common shares for cash at the end of the current year. (6 points)
Earnings per share 2005
increase
decrease
no effect
increase
decrease
no effect
Robert Libby
297
(b) Recorded an impairment loss on depreciable equipment at the end of the previous year
(2004). (6 points)
Net income 2005
increase
decrease
no effect
increase
decrease
no effect
(c) Recorded the end of period adjustment for bad debt expense for the current year. (6
points)
Cash flow from operations 2005
increase
decrease
no effect
increase
decrease
no effect
Robert Libby
298
(d) Recorded the write down of inventory to lower of cost or market during the current year.
(6 points)
Cash flow from operations 2005
increase
decrease
no effect
increase
decrease
no effect
(e) Recorded the write-up of available-for-sale securities to market at the end of the current
year. (6 points)
Stockholders equity 12/31/2005
increase
decrease
no effect
increase
decrease
no effect
(f) Recorded the sale of available-for-sale securities with a net book value of $1,000 and a
cost of $900 for $950 at the end of the current year. (3 points)
Net Income 2005
Robert Libby
increase
299
decrease
no effect
13. Assume that Nabors incurred $300 in cash costs during 2005 to refurbish equipment with
four years remaining in its useful life. The refurbishing increased the effectiveness of the
equipments operations beyond that expected given normal maintenance. They recorded the
transaction with the following entry:
Direct costs (+E)
Cash (-A)
300
300
What is the most likely effect of this mistake on the following amounts? Circle U/S if the
amount is understated, O/S if overstated, or NE if there is no effect. (6 points)
Robert Libby
(a)
U/S
O/S
NE
(b)
U/S
O/S
NE
300
10
Final Examination
NCC 500 Financial Accounting
Fall 2006
Robert Libby
301
Robert Libby
302
12/31/05
-565,001
858,524
822,104
51,292
199,196
121,191
$2,617,308
222,802
3,886,924
341,939
161,434
$7,230,407
-767,912
336,589
224,336
23,619
$1,352,456
1,251,751
151,415
716,645
$3,472,267
----
12/31/04
-384,709
955,304
540,103
28,653
39,599
72,068
$2,020,436
71,034
3,275,495
327,225
168,419
$5,862,609
-804,550
211,600
171,234
11,932
$1,199,316
1,201,686
146,337
385,877
$2,933,216
----
158
1,591,125
(15,649)
192,980
1,989,526
$3,758,140
7,230,407
150
1,358,374
-148,229
1,422,640
$2,929,393
5,862,609
Robert Libby
303
12/31/2005
-3,459,908
5,671
85,430
$3,551,009
-1,997,267
249,973
338,532
44,847
46,440
$2,677,059
873,950
-30,517
194,738
$225,255
648,695
-4.16
4
-156,067
162,189
304
12/31/05
-648,695
-338,532
194,738
4,880
401
20,729
218
19,465
(40,197)
(1,076)
4,819
-465
-(2,600)
-(271,969)
(21,704)
(6,808)
811
121,850
8,262
9,989
$1,029,500
-(745,743)
749,562
(46,201)
(36,005)
(907,316)
27,463
-$(958,240)
-10,813
(8)
-(424)
-194,464
(99,483)
(2,736)
$102,626
6,406
-180,292
384,709
565,001
(In thousands)
Robert Libby
648,695
26,589
34,987
(16,393)
(16,393)
253
253
(836)
(836)
151
151
9,198
110
(1,789)
194,455
(1)
(17,673)
35,501
21,163
(695)
327
(10)
7,836
232,751
305
18,594
(583)
151
26,589
648,695
(81,809)
(21,163)
695
4,819
(15,649)
(15,649) $
648,695
26,589
34,987
18,865 $
(3,002) $
(992) $
178,109 $
(81,809)
1,989,526 $
693,446
194,464
(99,483)
35,501
4,819
135,301
3,758,140
3. INVESTMENTS
Certain information regarding our marketable debt and equity securities is presented below:
(In thousands)
2005
Available-for-sale:
Proceeds from sales and maturities
Realized gains, net of realized losses
$ 688,275
16,524
$ 838,816
13,943
2003
$ 1,393,638
3,417
2005
Land
Buildings
Drilling, workover and well-servicing rigs, and related equipment
Marine transportation and supply vessels
Oilfield hauling and mobile equipment
Other machinery and equipment
Net profits interests in oil and gas properties
Construction in process (1)
2004
22,413
40,271
4,565,792
152,167
237,303
36,323
195,146
332,779
5,582,194
(1,695,270)
$ 3,886,924
16,801
31,394
4,078,244
161,567
166,663
31,608
139,130
49,925
4,675,332
(1,399,837)
$ 3,275,495
(1) Relates to amounts capitalized for new or substantially new drilling, workover and well-servicing rigs that
were under construction and had not yet been placed in service as of December 31, 2005 or 2004.
Repair and maintenance expense included in direct costs in our consolidated statements of income
totaled $327.5 million, $253.0 million and $195.7 million for the years ended December 31, 2005, 2004
and 2003, respectively.
Interest costs of $4.2 million, $1.9 million and $.9 million were capitalized during the years ended
December 31, 2005, 2004 and 2003, respectively.
5. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Our principal operations accounted for using the equity method include a construction operation (50%
ownership) and a logistics operation (50% ownership) in Alaska, and drilling and workover operations
located in Saudi Arabia (50% ownership). These unconsolidated affiliates are integral to our operations in
those locations. See Note 11 for a discussion of transactions with these related parties.
Combined condensed financial data for investments in unconsolidated affiliates accounted for using the
equity method of accounting is summarized as follows:
December 31,
(In thousands)
2005
Current assets
Long-term assets
Current liabilities
Long-term liabilities
$ 105,073
155,104
67,954
40,201
(In thousands)
Gross revenues
Gross margin
Net income
Nabors Earnings from unconsolidated affiliates
Robert Libby
2005
$ 346,127
46,722
16,119
5,671
306
2004
$ 89,097
143,051
48,977
40,201
Carrying
Value
Fair Value
$ 224,030
270,844
$ 224,730
278,285
700,000
826,700
824,789
822,497
$ 2,019,663
$ 2,152,212
The fair values of our cash equivalents, trade receivables and trade payables approximate their carrying
values due to the short-term nature of these instruments.
7. DEBT
Long-term debt consists of the following:
December 31,
(In thousands)
2005
4.875% senior notes due December 31, 2009 (par value 225,000)
5.375% senior notes due December 31, 2012 (par value 275,000)
$700 million zero coupon senior exchangeable notes due June 2023
$1.2 billion zero coupon convertible senior debentures due February 2021 (1)
$ 224,030
270,844
700,000
824,789
2,019,663
767,912
$ 1,251,751
2006
2007
2008
2009
2010
Thereafter
$ 10,540
7,974
3,049
2,188
1,482
790
$ 26,023
The above amounts do not include property taxes, insurance or normal maintenance that the lessees are
required to pay. Rental expense relating to operating leases with terms greater than 30 days amounted to
$20.1 million, $19.2 million and $22.4 million for the years ended December 31, 2005, 2004 and 2003,
respectively.
Robert Libby
307
2005
Accrued compensation
Deferred revenue
Workers compensation liabilities
Interest payable
Litigation reserves
Other accrued liabilities
2004
$ 88,071
19,542
37,458
9,728
30,182 (1)
39,355
$ 67,648
25,304
28,994
10,442
3,737
35,109
$ 224,336
$ 171,234
Supplemental cash flow information for the years ended December 31, 2005, 2004 and 2003 is as
follows:
(In thousands)
Robert Libby
2005
2003
$ 25,480
28,507
$ 29,306
27,899
$ 16,542
41,033
38,682
9,554
(2,035)
46,201
$ 46,201
308
2a)
2b)
3)
NABORS
10) (a) Decreased
(b) because the fair value is higher than book value.
(c) n=7, PV=278,285, FV=275,000, PMT=14,781.25
No effect. Depreciation expense is an addback. It does not
i = 5.1673
(-1 each input)
affect cash flow from operations.
(d) Bonds payable (L)
270,844
Increase by reducing taxes paid.
(-3 each direction)
Loss on retirement (E)
7,441
Cash (A)
278,285
Investments in unconsolidated affiliates (A) 5,671
(Bonds payable, net 270,844 ok)
Earnings from unconsolidated affiliates (R)
5,671
(-1 each account and amount to -7)
Cash (A)
(5671-2600)
3,071
Investments in unconsolidated affiliates (A)
3,071 11) Cash (A)
194,464
(-1 each account, -2 each of the 2 amounts to -8)
(-1 if 2600)
Common Shares (SE)
9
Capital in excess of par (SE)
194,455
2006 payment only for current liabilities
(-1.5 each account and amount to -9)
4)
2
2
4
7
12a) Increase
Decrease
(-3 each)
12b) Increase
No effect
(-3 each)
12c) No effect
Decrease
(-3 each)
12d) No effect
Decrease
(-3 each)
12e) Increase
no effect
(-3 each)
12f) increase
(-3)
(-3 each)
(-2 each)
7) a) 38682+9554-46201=
b)
158
158
(-3 if indicate no entry)
2,035 increase
2,035 increase
8)
57
400
400
100
(number approx.)
100
100
100
63
-1 math
Robert Libby
309
120
Robert Libby
310
Final Examination
NCC 5000
FINANCIAL ACCOUNTING
Summer 2012
Name ____________________
Instructions:
This open book examination consists of multiple questions. (Be sure that your examination
contains 10 pages, including this page.) All questions are based on the information in the
financial statements and notes packet you were given. Questions can be worked in any order.
For partial credit, please show all calculations and state any assumptions you make. Record your
answers on the exam in the space provided. You may use whatever books, notes, and calculators
you wish. You have 180 minutes to complete this exam. Be sure to answer each question
based on the correct companys statements.
By completing this exam, I acknowledge that I have read and agreed to abide by the School
Honor Code.
Points
Assigned
Suggested
Times
Problem I TJX
52
65 minutes
Problem II Nautilus
24
30 minutes
44
55 minutes
Review
30 minutes
120
Robert Libby
311
180 minutes
(less)
2. Assume that, at the end of 2008, the cost of Merchandise inventories was $2,837,378.
What was the most likely effect of the adjustment to lower of cost or market at the end of
2008 on the following amounts? Ignore taxes. Indicate an amount and circle a direction or
no effect.
a) Income before income taxes for 2008 _____________ Increase Decrease
No effect
No effect
Robert Libby
312
3. a) What will be total interest expense on the 7.45% unsecured semiannual notes for 2009?
Round interest rates to 4 decimal places.
b) What was the date of issuance market rate for the zero coupon subordinated notes?
c) What will be the net book value of the zero coupon subordinated notes on January 26,
2011?
Robert Libby
313
4. The following list contains the 2006 Cash Flows from Financing Activities, along with some
non-financing activities. Prepare the Financing Section of the 2006 Cash Flow Statement.
(Do not try to reconcile with remainder of statement.)
Cash dividends paid
Cash payments for repurchase of common stock
Increase in accounts payable
Interest paid
Principal payments to financial institution for capital
lease obligation
Payments of rent
Principal payments on long-term debt
Proceeds from borrowings of long-term debt
Proceeds from issuance of common stock
Proceeds from sale of property
5.
(105,251)
(603,739)
35,010
(29,600)
(1,580)
(774,900)
(100,000)
204,427
102,438
9,688
Assume that a 2-for-1 stock split accounted for as a stock dividend (with no change in par
value) took place on the last day of 2008. All statements were retroactively restated to
reflect the stock split. What were the most likely balances in the following accounts on
January 27, 2007 as reported in the 2007 annual report?
Common Stock $___________________
Robert Libby
314
2. What amount was transferred from Work-in-process to Finished goods during 2005?
Robert Libby
315
3. Assume that Nautilus had done each of the following in preparation of its 2005
statements, and no adjustments were made. What would be the effect of each event on
the following amounts? Circle U/S for understate, O/S for overstate, or NE for no effect.
Treat each item independently and ignore income tax effects.
(a) The company made the following adjusting entry for depreciation of factory equipment:
Selling, general and administrative expense
Accumulated depreciation
The goods produced by the equipment were sold by December 31. No subsequent
adjustment was made.
(a)
Total assets
at year-end
U/S
O/S
NE
(b)
Gross profit
the year
U/S
O/S
NE
(c)
U/S
O/S
NE
U/S
O/S
NE
(d)
Retained earnings
at year-end
(b) On December 31, 2005, Nautilus paid unemployment insurance for the 4th quarter of
2005 for office workers and made the following entry:
Work in process inventory
300
Cash
300
No subsequent adjustment was made.
Robert Libby
(a)
Total assets
at year-end
(b)
U/S
O/S
NE
U/S
O/S
NE
(c)
U/S
O/S
NE
(d)
O/S
NE
316
2. What was the average price per share received by the company for the Common stock
issued on exercise of stock options?
Robert Libby
317
3. What was the effect of properly recording of Stock option compensation expense on
the following? Indicate a direction and amount or no effect. Ignore taxes.
Net income for 2009 ______________
Increase
Decrease
No effect
Decrease
No effect
Decrease
No effect
4. Assume that the company acquired ABC Company at the beginning of the current year.
The company hired two valuation consultants to assist in the $200 purchase price
allocation. They produced the two following allocations:
Alternative A
Accounts Receivable
Inventories
Plant and equipment
Goodwill
Liabilities
$50
30
100
100
80
Alternative B
Accounts Receivable
Inventories
Plant and equipment
Goodwill
Liabilities
$50
30
50
150
80
Which alternative would most likely result in the HIGHEST values for each of the
following values for the current year (2009)? (Circle one alternative for each amount or
indicate no difference.)
Net Income
Alternative A
Alternative B
No Difference
Total Assets
Alternative A
Alternative B
No Difference
Alternative A
Alternative B
No Difference
Robert Libby
318
5. The company made two adjusting entries at the end of 2009 to adjust Investments
classified as Available for Sale to market:
a) First they made an entry to record Other than temporary impairment. What was the
effect of this entry on the following? Indicate a direction and amount or no effect.
Ignore taxes.
Net income for 2009 ______________
Increase
Decrease
No effect
Decrease
No effect
b) Second they made an entry to adjust the year end balance for these investments to
market. What was the effect of this entry on the following? Indicate a direction and
amount or no effect. Ignore taxes.
Net income for 2009 ______________
Increase
Robert Libby
319
Decrease
No effect
Decrease
No effect
6. If the company did each of the following during the current year, what would be the most
likely effect on each of the following ratios for the current year? Use definitions from
chapter 5 and 14 and the notes. Ignore taxes. (Circle increase, decrease, or no effect.)
a) Recorded Equity in income of affiliated companies of $500 and received Dividends
received from affiliated companies of $200.
Net income
increase
decrease
no effect
increase
decrease
no effect
b) At the end of the year when the market rate was 7.75%, retired long-term debt with a
face value of $1,000, coupon rate of 8%, and date of issuance market rate of 7.5%.
Net income
increase
decrease
no effect
increase
decrease
no effect
Total liabilities
increase
decrease
no effect
Robert Libby
320
10
Final Examination
NCC 5000 Financial Accounting
Summer 2012
Robert Libby
321
TJX
1,242,689
470,939
$
771,750
Robert Libby
322
TJX
In thousands
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Merchandise inventories
Prepaid expenses and other current assets
Current deferred income taxes, net
Total current assets
Property at cost:
Land and buildings
Leasehold costs and improvements
Furniture, fixtures and equipment
Total property at cost
Less accumulated depreciation and amortization
Net property at cost
Property under capital lease, net of accumulated
amortization of $14,890 and $12,657, respectively
Other assets
Goodwill and tradename, net of amortization
TOTAL ASSETS
LIABILITIES
Current liabilities:
Obligation under capital lease due within one year
$
Accounts payable
Accrued expenses and other liabilities
Federal, foreign and state income taxes payable
Total current liabilities
Other long-term liabilities
Non-current deferred income taxes, net
Obligation under capital lease, less portion due within one
year
Long-term debt, exclusive of current installments
Commitments and contingencies
SHAREHOLDERS EQUITY
Common stock, authorized 1,200,000,000 shares, par value
$1, issued and outstanding 427,949,533 and 453,649,813,
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Total shareholders equity
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $
Robert Libby
323
732,612
143,289
2,737,378
215,550
163,465
3,992,294
January 27,
2007
856,669
115,245
2,581,969
159,105
35,825
3,748,813
277,988
1,785,429
2,675,009
4,738,426
2,520,973
2,217,453
268,056
1,628,867
2,373,117
4,270,040
2,251,579
2,018,461
17,682
190,981
181,524
6,599,934
19,915
115,613
182,898
6,085,700
2,008
1,516,754
1,213,987
28,244
2,760,993
811,333
42,903
1,854
1,372,352
1,008,774
2,382,980
583,047
21,525
20,374
833,086
22,382
785,645
427,950
(28,685)
1,731,980
2,131,245
6,599,934
453,650
(33,989)
1,870,460
2,290,121
6,085,700
TJX
In thousands
January 26,
2008
771,750
369,396
18,318
7,600
57,370
738,039
353,110
32,743
69,804
(6,756)
(101,799)
(3,632)
6,286
(25,516)
(112,411)
26,397
(201,413)
2,144
117,304
(23,179)
50,165
202,893
37,909
22,905
1,361,10
170,592
(42,558)
18,679
1,195,03
Robert Libby
(6,241)
(124,057)
856,669
732,612
324
(8,658)
391,020
465,649
856,669
TJX
Depreciation and Amortization: For financial reporting purposes, TJX provides for depreciation and
amortization of property by the use of the straight-line method over the estimated useful lives of the assets.
Buildings are depreciated over 33 years. Leasehold costs and improvements are generally amortized over
their useful life or the committed lease term (typically 10 years), whichever is shorter. Furniture, fixtures
and equipment are depreciated over 3 to 10 years. Depreciation and amortization expense for property was
$364,200 for fiscal 2008, $347,000 for fiscal 2007 and $307,700 for fiscal 2006. Amortization expense for
property held under a capital lease was $2,200 in fiscal 2008, 2007 and 2006. Maintenance and repairs are
charged to expense as incurred. Significant costs incurred for internally developed software are capitalized
and amortized over 3 to 10 years. Upon retirement or sale, the cost of disposed assets and the related
accumulated depreciation are eliminated and any gain or loss is included in net income. Pre-opening costs,
including rent, are expensed as incurred.
Impairment of Long-Lived Assets: TJX periodically reviews the value of its property and intangible
assets in relation to the current and expected operating results of the related business segments in order to
assess whether there has been an other than temporary impairment of their carrying values. An impairment
exists when the undiscounted cash flow of an asset is less than the carrying cost of that asset. Store-by-store
impairment analysis is performed at a minimum on an annual basis in the fourth quarter of a fiscal year. An
impairment analysis is also performed for goodwill and tradenames at a minimum on an annual basis in the
fourth quarter of a fiscal year. In the fourth quarter of fiscal 2008, TJX recorded a pre-tax impairment
charge of $7,626, related to Bobs Stores, which is reflected in Bobs Stores segment results. The
impairment charge relates to certain long-lived assets and intangible assets (specifically the Bobs Stores
tradename discussed above) at Bobs Stores and represents the excess of recorded carrying values over the
estimated fair value of these assets at fiscal 2008 year end.
Advertising Costs: TJX expenses advertising costs as incurred. Advertising expense was $284,100,
$244,700 and $203,000 for fiscal 2008, 2007 and 2006, respectively.
D. Long-Term Debt and Credit Lines
The table below presents long-term debt as of January 26, 2008 and January 27, 2007. All amounts are
net of unamortized debt discounts.
In thousands
General corporate debt:
7.45% unsecured semiannual notes, maturing January 26, 2009 (after reduction
of unamortized debt discount of $119 and $omitted in fiscal 2008 and 2007,
respectively)
Market value adjustment to debt hedged with interest rate swap
C$235 term credit facility due January 11, 2010 (interest rate Canadian Dollar
Bankers Acceptance rate plus 0.35%)
Total general corporate debt
Subordinated debt:
Zero coupon subordinated notes due January 26, 2016 (net of reduction of
unamortized debt discount of $118,625 and $omitted in fiscal 2008 and 2007,
respectively)
Total subordinated debt
Robert Libby
325
January 26,
2008
January 27,
2007
199,881 $
1,215
omitted
(4,370)
233,120
434,216
199,186
394,633
398,870
omitted
398,870
omitted
TJX
F. Commitments
TJX is committed under long-term leases related to its continuing operations for the rental of real estate
and fixtures and equipment. Most of our leases are store operating leases with a ten-year initial term and
options to extend for one or more five-year periods. Certain Marshalls leases, acquired in fiscal 1996, had
remaining terms ranging up to twenty-five years. Leases for T.K. Maxx are generally for fifteen to twentyfive years with ten-year kick-out options. Many of the leases contain escalation clauses and early
termination penalties. In addition, we are generally required to pay insurance, real estate taxes and other
operating expenses including, in some cases, rentals based on a percentage of sales which aggregated to
approximately one-third of the total minimum rent for the fiscal year ended January 26, 2008 and
January 27, 2007, respectively.
Following is a schedule of future minimum lease payments for continuing operations as of January 26,
2008:
Capital
Lease
In thousands
Fiscal Year
2009
2010
2011
2012
2013
Later years
Total future minimum lease payments
Less amount representing interest
Net present value of minimum capital lease payments
3,726
3,726
3,726
3,897
3,912
11,084
30,071
7,689
22,382
Operating
Leases
$
943
898
809
708
586
1,715
5,659
The capital lease commitment relates to a 283,000-square-foot addition to TJXs home office facility.
Rental payments commenced June 1, 2001, and we recognized a capital lease asset and related obligation
equal to the present value of the lease payments of $32,600.
Rental expense under operating leases for continuing operations amounted to $896,600, $837,600, and
$774,900 for fiscal 2008, 2007 and 2006, respectively.
TJX had outstanding letters of credit totaling $32,700 as of January 26, 2008 and $43,800 as of
January 27, 2007. Letters of credit are issued by TJX primarily for the purchase of inventory.
Robert Libby
326
TJX
The major components of accrued expenses and other current liabilities are as follows:
January 26,
2008
In thousands
Employee compensation and benefits, current
Computer Intrusion
Rent, utilities and occupancy, including real estate taxes
Merchandise credits and gift certificates
Insurance
Sales tax collections and V.A.T. taxes
All other current liabilities
Accrued expenses and other current liabilities
335,180
117,266
158,870
141,528
48,954
117,585
294,604
1,213,987
January 27,
2007
$
307,986
138,293
128,781
51,407
116,092
266,215
1,008,774
All other current liabilities include accruals for advertising, property additions, dividends, freight,
reserve for sales returns, and other items, each of which are individually less than 5% of current liabilities.
The major components of other long-term liabilities are as follows:
January 26,
2008
In thousands
Employee compensation and benefits, long-term
Reserve related to discontinued operations
Accrued rent
Landlord allowances
Fair value of derivatives
Tax reserve, long-term
Long-term liabilities other
Other long-term liabilities
Robert Libby
327
125,421 $
46,076
150,530
58,797
143,091
269,157
18,261
811,333 $
January 27,
2007
119,978
57,677
141,993
53,151
96,475
97,448
16,325
583,047
Nautilus
NAUTILUS INC
PARTIAL Consolidated Statements of Income
(In Thousands Except Per Share Amounts For Period Ended)
12/31/2005 12/31/2004
631,310
523,837
352,496
279,043
278,814
244,794
NET SALES
COST OF SALES
Gross profit
NAUTILUS INC
PARTIAL Consolidated Balance Sheet
In Thousands For Period Ended
CURRENT ASSETS:
Cash and cash equivalents
Short-term investments
Trade receivables (less allowance for doubtful accounts of
$4,085 and $3,252 in 2005 and 2004, respectively)
Inventories
...........
STOCKHOLDERS' EQUITY:
Common stock - 75,000,000 shares authorized; no par value;
issued and outstanding, 32,779,611 and 33,147,758 shares in 2005 and
2004, respectively
Retained earnings
Accumulated other comprehensive income
Total stockholders' equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
12/31/05
-7,984
-116,908
-96,084
12/31/04
-19,266
85,319
95,593
-49,104
-1,602
-9,478
248,123
2,741
$252,466
413,286
238,474
4,084
$252,036
359,641 5.
2004
$ 31,170
1,104
16,830
$ 49,104
If all inventories had been accounted for using the FIFO method, inventory values would have been
$12,054 and $10, 276 higher at the end of 2005 and 2004, respectively.
Robert Libby
328
Number of
Shares
BALANCE,
February 2, 2008
Net income
Dividends paid on
common stock,
($.1667 per share 1st and 2nd qtrs)
($.20 per share 3rd and 4th qtrs)
($2.00 per share 3rd qtr)
Common stock
issued on exercise
of stock options
Issuance of nonvested stock,
net of forfeitures
Amortization of
non-vested
stock grants
Stock option
compensation
expense
Common stock
purchased and retired
Income tax benefit
related to
exercise of stock
options
3-for-2 stock split
Unrealized loss on
investments,
BALANCE, January
31, 2009
Robert Libby
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Unearned
Compensation
Retained
Earnings
Total
29,841,668
298
46,977
291,045
338,320
104,409
104,409
(15,269)
(15,269)
(18,474)
(18,474)
(92,922)
(92,922)
994,555
10
12,714
12,724
139,635
4,879
4,879
289
289
(9,354)
(9,359)
13,545
(155)
13,545
-
omitted
omitted
- $
omitted $ omitted
(557,100)
(5)
15,487,507
155
45,906,265 $
459 $
(1)
68,894 $
329
268,789 $
35,495 $
2,000
37,495 $
- $
- $
Held-to-Maturity Securities:
State and municipal bonds $
Fixed maturities
Certificates of deposit
U.S. treasuries
31,965 $
2,500
2,945
2,985
536 $
37
42
19
40,395 $
5,165 $
Trading Securities:
Mutual funds
Gross
Gross
Unrealized Unrealized
Gains
Losses
Other-thanTemporary
Impairment
(1,460) $
(1,460) $
Estimated
Fair
Value
(3,757) $
(1,400)
(5,157) $
30,278
600
30,878
(90)
(7)
(9)
- $
-
32,411
2,530
2,987
2,995
634 $
(106) $
- $
40,923
- $
(1,075) $
- $
4,090
Robert Libby
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
145,835 $
- $
- $
145,835
$
$
26,260 $
2,899
4,990
34,149 $
375 $
1
24
400 $
(10) $
(10) $
26,625
2,900
5,014
34,539
4,143 $
5 $
(21) $
4,127
330
10
1)
2)
3a)
3b)
3c)
4)
TJX
Current
Non-Cur
Total
Ending
335,180
125,421
460,601
-Beginning
307,986
119,978
427,964
Change
32,637 more
(-2 if just current or non-current)
-3 -3
FG Inventory
8
31,170
390,504
352,496 CGS (-2)
69,178
(to -6)
3a) Cost of goods sold (+E)
(-2 each)
8
CGS (+E) (2,737,378 - 2,837,378)
100,000
Selling, general and administrative expense (-E)
Inventories (-A)
100,000
NE, O/S, NE, NE
a) 100,000 decrease
-1.5 each direction and amount
b) 100,000 increase
3b) Unemloyment ins. Exp. (+E)
(-2 each)
8
WIP Inventory (-A)
(7.45% x 200,000) + 119 =
15,019
O/S, NE, O/S, O/S
-2
-2
-4
or
n = 2; FV = -200,000; PMT = -7,450; PV = 199,881
i = 3.7564
THE BUCKLE
7.5
first half = .037564 x 199881 =
7,508.3299
1) Common Stock (-SE)
5
second half = .037564 x (199881 + 58) =
7,510.5086
Additonal Paid-in Capital (-SE)
9,354
Total for 2009
15,018.8385
Cash (-A)
9,359
(-2 each input determining i; -1.5 each NBV to -8)
(-1 each account; 1.5 each amount) (-2 if dr. to Treas Stk)
(if done annually -2)
(e.g., 7.514% x 199881 or 7.5128% x 199881)
2) 12,724/994,555 = 0.012794 ($thousand)
8
n = 16-8 =8; FV = 398,870+118,625 = 517,495; PV = 398,870
-4
-4
12.79
i = 3.3081
(-1 each input to -4)
3) Compensation expense (+E, -SE)
289
6
n = 16 - 11 = 5; rest same
PV = 439,778.9292
Additional Paid-in Capital (+SE)
289
(-1 for n; look out for carry forwards)
Net income
289 Decrease (-1; -1 )
Cash flow from operations
No effect (-2)
(105,251)
Cash dividends paid
Stockholders' equity
No effect (-2)
(603,739)
Cash payments for repurchase of common stock
(1,580)
Principal payments on capital lease obligation
4) Alt. A would have extra Depreciation expense (+E, -SE)
6
(100,000)
Principal payments on long-term debt
Accum. Depreciation (+XA, -A)
204,427
Proceeds from borrowings of long-term debt
Net Income
Alternative B
102,438
Proceeds from issuance of common stock
Total Assets
No Difference
(503,705)
Cash Flows from Financing Activities
Cash Flow from Ops
No Difference
(-1 each omitted or extra)
(-1 each wrong sign to -3)
(-2 each)
2)
(-3) beg
transfers from WIP
(-3) end
5) RE or APIC(-1) (453,650/2)
226,825
5a) Unrealized Loss (+E, -SE)
5,157
Common Stock
226,825
Investments (-A)
Common Stock
226,825
226,825
Net income
5157
decrease
Paid in capital
zero
226,825 (otherwise -2 each)
CFO
No effect
Retained earnin 2,097,285 1,870,460
perfect
above answer(-1)
5b) Net unreal. Loss (+XSE, -SE)
1,460
Allow to value at market (+XA, -A)
Nautilus
6 1) -Change in End Inv
(12,054.0)
Net income
No effect
(12,054.0) -2
Change in Cum. CGS
CFO
No effect
12,054.0
Change in Cum. Pretax Income
4,218.9 -2
6a) Investment (+A)
500
(.35 x 12,054)
Taxes saved
7,835.1
Change in RE
Equity in inc. of affiliates (+R, +SE)
248,123.0 -2
RE as reported
Cash (+A)
200
RE under FIFO
255,958.1
Investment (-A)
(-3 if also use beginning LIFO reserve)
Net income
Increase
Cash flow from inv.
no effect
Robert Libby
331
5,157
(-1.5, -1.5)
(-3)
6
1,460
(-3)
(-3)
6
500
200
(-3)
(-3)
6
44
76
120