ACC 504 UPDATED JULY 2013 COCA COLA

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(TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report: 

Income Taxes Payable
$471

Short-term Investments and Marketable Securities 
8,109

Cash
8,442

Other non-current Liabilities
10,449

Common Stock
1,760

Receivables
4,812

Other Current Assets
2,973

Long-term Investments
10,448

Other Non-current Assets
3,585

Property, Plant and Equipment
23,486

Trademarks
6,527

Other Intangible Assets
20,810

Allowance for Doubtful Accounts
53

Accumulated Depreciation
9,010

Accounts Payable
8,680

Short Term Notes Payable
17,874

Prepaid Expenses
2,781

Other Current Liabilities
796

Long-Term Liabilities 
14,736

Paid-in-Capital in Excess of Par Value
11,379

Retained Earnings
55,038

Inventories
3,264

Treasury Stock 
35,009






Other information taken from the Annual Report:





Sales Revenue for 2012
$48,017

Cost of Goods Sold for 2012
19,053

Net Income for 2012
9,019

Inventory Balance on 12/31/11
3,092

Net Accounts Receivable Balance on 12/31/11
4,920

Total Assets on 12/31/11
79,974

Equity Balance on 12/31/11
31,921



Required:
1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.
2. Using the Balance Sheet from your answer above, calculate the Current Ratio and Return on common stockholders’ equity ratio. (Make sure to show all your work).

(Points : 36) 



2. 
(TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013:




Accounts Payable
$38,080

Accounts Receivable
6,768

Cash
7,781

Common Stock
3,952

Cost of Goods Sold
352,488

Income Tax Expense
7,981

Interest Expenses
2,064

Membership Revenues
3,048

Net Sales
466,114

Operating, Selling and Administrative Expenses
88,873

Retained Earnings
72,978


Required:

Using the information provided above:
1. Prepare a multiple-step income statement
2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results.

(Points : 36) 



3. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below:
Cash flow from operating activities
In millions
In millions


For the year ended 2012
For the year ended 2011

Net (loss) earnings
$(12,650)
$7,074

Depreciation and amortization
5,095
4,984

Impairment of goodwill and purchased intangible assets
18,035
885

Stock-based compensation expense
635
685

Provision for doubtful accounts
142
81

Provision for inventory
277
217

Restructuring charges
2,266
645

Deferred taxes on earnings
(711)
166

Excess tax benefit from stock-based competition
(12)
(163)

Other, net
265
(46)

Accounts and financing receivables
1,269
(227)

Inventory
890
(1,252)

Accounts payable
(1,414)
275

Taxes on earnings
(320)
610

Restructuring
(840)
(1,002)

Other assets and liabilities
(2,356)
(293)

Net cash provided by operating activities
10,571
12,639

Cash flows from investing activities:



Investment in property, plant, and equipment
(3,706)
(4,539)

Proceeds from sale of property, plant, and equipment
617
999

Purchases of available-for-sale securities and other investments 
(972)
(96)

Maturities and sales of available-for-sale securities and other investment
662
68

Payments in connection with business acquisitions, net of cash acquired 
(141)
(10,480)

Proceeds from business divestiture, net 
87
89

Net cash used in investing activities
(3,453)
(13,959)

Cash flow from financing activities:



(Payments) issuance of commercial paper and notes payable, net
(2,775)
(1,270)

Issuance of debt 
5,154
11,942

Payment of debt
(4,333)
(2,336)

Issuance of common stock under employee stock plans
716
896

Repurchase of common stock
(1,619)
(10,117)

Excess tax benefit from stock-based compensation
12
163

Cash dividends paid
(1,015)
(844)

Net cash used in financing activities
(3,860)
(1,566)

Increase (decrease) in cash and cash equivalents
3,258
(2,886)

Cash and cash equivalents at beginning of period
8,043
10,929

Cash and cash equivalents at end of period
$11,301
$8,043


Required:

1) Please calculate the percentage increase or decrease in cash for the total line of the operating, investing, and financing sections bolded above and explain the major reasons for the increase or decrease for each of these sections. 


2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio



4. (TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.” 

Assuming the goal is to maximize net income, choose an accounting treatment from each of the following scenarios, and explain to your CEO why the choice will produce the desired effect on reported Net Income for the current year. Include in your answer the effect of the choice on both the income statement and balance sheet. 

Required: 
a. Goforit carries significant electronics inventory in a competitive environment where prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.

b. Goforit has a large investment in warehouse equipment including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: Straight line (SL) or double declining balance (DDB)? 






5. (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below. Ratio Name
Johnson & Johnson
Pfizer





Profit margin
16.1%
24.7%

Inventory turnover ratio
3.1
1.7

Average collection period
59.4 days
69.1 days

Cash debt coverage ratio
.27
.16

Debt to Total assets
46.6%
127.5%


Required:

1) Please explain the meaning of each of the Pfizer ratios above. 


2) Please state which company performed better for each ratio. 









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