000S Omitted Fonzarelli Acc 421 Week 4
Complete the following deliverables as a team:
- The Coca-Cola/PepsiCo Comparative Analysis Case on p. 255. Your responses should be approximately one to two sentences for each segment (a, b, c,e).
- The Financial Reporting Problem, The Procter & Gamble Company on p. 1458. Your responses should be approximately one to two sentences for each segment (a, b, c,).
Complete the following:
- CA 5-3, p. 252
- CA 24-12, p. 1457
Comparative Analysis Case
The Coca-Cola Company and PepsiCo, Inc.
The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies’ complete annual reports, including the notes to the financial statements, are available online.
Instructions
Use the companies’ financial information to answer the following questions.
(a) What format(s) did these companies use to present their balance sheets?
(b) How much working capital did each of these companies have at the end of 2014? Speculate as to their rationale for the amount of working capital they maintain.
(c) What are the companies’ annual and 5-year (2010–2014) growth rates in total assets and long-term debt 2012?
(d) What were these two companies’ trends in net cash provided by operating activities over the period 2012–2014?
(e) Compute both companies’ (1) current cash debt coverage, (2) cash debt coverage, and (3) free cash flow. What do these ratios indicate about the financial condition of the two companies?
Financial Reporting Problem
The Procter & Gamble Company (P&G)
As stated in the chapter, notes to the financial statements are the means of explaining the items presented in the main body of the statements. Common note disclosures relate to such items as accounting policies, segmented information, and interim reporting. The financial statements of P&G are presented in Appendix B. The company’s complete annual report, including the notes to the financial statements, is available online.
Instructions
Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
(a)What specific items does P&G discuss in its Note 1—Summary of Significant Accounting Policies? (List the headings only.)
(b)For what segments did P&G report segmented information? Which segment is the largest? Who is P&G’s largest customer?
(c)What interim information was reported by P&G?
Describe fully how each of the items above should be reported in the financial statements of Arenes Corporation for the year 2017.
CA5-2 (Identifying Balance Sheet Deficiencies) The assets of Fonzarelli Corporation are presented below (000s omitted).
| FONZARELLI CORPORATION Balance Sheet (partial) December 31, 2017 |
||
| Assets | ||
| Current assets | ||
| Cash |
$ 100,000 |
|
| Unclaimed payroll checks |
27,500 |
|
| Debt investments (trading) (fair value $30,000) at cost |
37,000 |
|
| Accounts receivable (less bad debt reserve) |
75,000 |
|
| Inventory—at lower-of-cost (determined by the next-in, first-out method)-or-net realizable value |
240,000 |
|
| Total current assets |
479,500 |
|
| Tangible assets | ||
| Land (less accumulated depreciation) |
80,000 |
|
| Buildings and equipment |
$800,000 |
|
| Less: Accumulated depreciation |
250,000 |
550,000 |
| Net tangible assets |
630,000 |
|
| Long-term investments | ||
| Stocks and bonds |
100,000 |
|
| Treasury stock |
70,000 |
|
| Total long-term investments |
170,000 |
|
| Other assets | ||
| Discount on bonds payable |
19,400 |
|
| Sinking fund |
975,000 |
|
| Total other assets |
994,400 |
|
| Total assets |
$2,273,900 |
|
CA24-12 ETHICS (Reporting of Subsequent Events) In June 2017, the board of directors for McElroy Enterprises Inc. authorized the sale of $10,000,000 of corporate bonds. Jennifer Grayson, treasurer for McElroy Enterprises Inc., is concerned about the date when the bonds are issued. The company really needs the cash, but she is worried that if the bonds are issued before the company’s year-end (December 31, 2017) the additional liability will have an adverse effect on a number of important ratios. In July, she explains to company president William McElroy that if they delay issuing the bonds until after December 31 the bonds will not affect the ratios until December 31, 2018. They will have to report the issuance as a subsequent event which requires only footnote disclosure. Grayson expects that with expected improved financial performance in 2018, ratios should be better.