ACCY 500: Accounting Measurement, Reporting, and Control

Group Assignment 2

Group Name:

Student names:

Part I: Accounts Receivable and Uncollectible Amounts

Using the balance sheet of Google provided in the next page, answer the following questions:

1. As of December 31st, 2005, how much does Google expect to collect from its customers in the future because of sales that were made prior to January 1st, 2006?
2. Assume that Google had written off $2,500 (thousand) of its accounts receivable as permanently uncollectible during the year ended December 31st, 2005.  How much did bad debt expense Google record during 2005? 

 

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

		December 31,
		2004				2005
Assets
Current assets:
Cash and cash equivalents		$	426,873			$	3,877,174
Marketable securities			1,705,424				4,157,073
Accounts receivable, net of allowances of $3,962 and $14,852			311,836				687,976
Income taxes receivable			70,509				—
Deferred income taxes, net			19,463				49,341
Prepaid revenue share, expenses and other assets			159,360				229,507
Total current assets			2,693,465				9,001,071
Property and equipment, net			378,916				961,749
Goodwill			122,818				194,900
Intangible assets, net			71,069				82,783
Deferred income taxes, net, non-current			11,590				—
Prepaid revenue share, expenses and other assets, non-current			35,493				31,310
Total assets		$	3,313,351			$	10,271,813
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	32,672			$	115,575
Accrued compensation and benefits			82,631				198,788
Accrued expenses and other current liabilities			64,111				114,377
Accrued revenue share			122,544				215,771
Deferred revenue			36,508				73,099
Income taxes payable			—				27,774
Current portion of equipment leases			1,902				—
Total current liabilities			340,368				745,384
Deferred revenue, long-term			7,443				10,468
Liability for stock options exercised early, long-term			5,982				2,083
Deferred income taxes, net			—				35,419
Other long-term liabilities			30,502				59,502
Commitments and contingencies
Stockholders’ equity:
Class A and Class B common stock, $0.001 par value: 9,000,000 shares authorized at December 31, 2004 and December 31, 2005, 266,917, and 293,027 shares issued and outstanding, excluding 7,605, and 3,303 shares subject to repurchase (see Note 10) at December 31, 2004 and December 31, 2005			267				293
Additional paid-in capital			2,582,352				7,477,792
Deferred stock-based compensation			(249,470	)			(119,015	)
Accumulated other comprehensive income			5,436				4,019
Retained earnings			590,471				2,055,868
Total stockholders’ equity			2,929,056				9,418,957
Total liabilities and stockholders’ equity		$	3,313,351			$	10,271,813

See accompanying notes.

Part II: Accounts Receivables and Inventory

Please contemplate the Income-Statement and Note 17 (Supplemental information) for General Mills below and answer the following questions. For the purpose of this difficulty, assume that inventory values determined using the average cost method is identical to FIFO values. Also, suppose that revenue is presented net of bad debt expense.

1. Suppose that the Company charged $7 million as bad debt expense. Reckon the number of bad debts written off in 2010.

2. Compute the amount of cash collected from customers during the year ended May 30th, 2010.

3. What does cost flow assumption(s) for inventories General Mills use?

4. Suppose that General Mills had in all periods used FIFO as their cost flow assumption for all their inventories. What would have been General Mills’ book value of inventories at the end of the fiscal year 2010 under this alternative cost flow assumption?
5. What is the amount of inventory purchases in the fiscal year 2010?

 

Consolidated Statements of Earnings

GENERAL MILLS, INC. AND SUBSIDIARIES

(In Millions, Except per Share Data)	Fiscal Year
	2010	2009	2008
Net sales	$14,796.5	$14,691.3	$13,652.1
Cost of sales	8,922.9	9,457.8	8,778.3
Selling, general, and administrative expenses	3,236.1	2,951.8	2,623.6
Divestitures (gain), net	—	(84.9)	—
Restructuring, impairment, and other exit costs	31.4	41.6	21.0
Operating profit	2,606.1	2,325.0	2,229.2
Interest, net	401.6	382.8	399.7
Earnings before income taxes and after-tax earnings from joint ventures	2,204.5	1,942.2	1,829.5
Income taxes	771.2	720.4	622.2
After-tax earnings from joint ventures	101.7	91.9	110.8
Net earnings, including earnings attributable to noncontrolling interests	1,535.0	1,313.7	1,318.1
Net earnings attributable to noncontrolling interests	4.5	9.3	23.4
Net earnings attributable to General Mills	$ 1,530.5	$ 1,304.4	$1,294.7
Earnings per share – basic	$      2.32	$      1.96	$      1.93
Earnings per share – diluted	$      2.24	$      1.90	$      1.85
Dividends per share	$      0.96	$      0.86	$      0.78
See accompanying notes to consolidated financial statements.

 

NOTE 17. SUPPLEMENTAL INFORMATION

ThecomponentsofcertainConsolidatedBalanceSheetaccounts are asfollows:

In Millions	May 30, 2010	May 31, 2009
Receivables:
Fromcustomers	$1,057.4	$971.2
Lessallowancefordoubtful

accounts(15.8)(17.8)Total$1,041.6$953.4

 

In Millions	May 30, 2010	May 31, 2009
Inventories:
Raw materials and packaging	$ 247.5	$ 273.1
Finished goods	1,131.4	1,096.1
Grain	107.4	126.9
Excess of FIFO or weighted-

average cost over LIFO cost^(a)   (142.3)(149.3)Total$1,344.0$1,346.8

(a)Inventoriesof$958.3millionasofMay30,2010,and$908.3millionasofMay31,2009, were valued atLIFO.

Part III: Long-term Debt of Caterpillar

Refer to the Table in Caterpillar’s Annual Report for long-term liabilities. Recall that the Company’s fiscal year end is 31 December 2008. Using the information provided, answer the following questions:

NOTE: Always use Semi-Annual Calculations

 

1. Refer to the 6.550% notes due 2011 (1st instrument on the table). Calculate the interest expense on this note for fiscal 2009 (year ended 31 December 2009).

 

2. Refer to the 6.550% notes due 2011 (1st instrument on the table). Calculate the coupon payment on this note for fiscal 2009 (year ended 31 December 2009).

 

3. Refer to the same note as in part (a). Provide the entry that the Company will record at maturity.

 

			December 31,
(Millions of dollars)	2008		2007		2006
Machinery and Engines:
Notes—6.550% due 2011	$          250		$250		$250
Notes—5.700% due 2016	517		510		500
Debentures—7.250% due 2009	—		305		307
Debentures—9.375% due 2011	123		123		123
Debentures—7.000% due 2013	350		—		—
Debentures—7.900% due 2018	898		—		—
Debentures—9.375% due 2021	120		120		120
Debentures—8.000% due 2023	82		82		82
Debentures—6.625% due 2028	299		299		299
Debentures—7.300% due 2031	349		348		348
Debentures—5.300% due 2035	203		202		201
Debentures—6.050% due 2036	748		748		747
Debentures—8.250% due 2038	248		—		—
Debentures—6.950% due 2042	249		249		249
Debentures—7.375% due 2097	297		297		297
Capital lease obligations	293		68		72
Other	7101		38		99
Total Machinery and Engines	5,736

 

Financial Products:	15,000		9		4
Commercial paper
Medium-term notes	15,073		12,678		12,857
Deposit obligations	—		232		232
Other	525		377		489
Total Financial Products	17,098		14,190		13,986
Total long-term debt due after one year	$     22,834		$     17,829		$     17,680
1 Increase in 2008 due to the consolidation of Cat Japan. See Note 25 for additional details.

 

Part IV: Fixed Assets of BP

On the next page, you can find the note on Property, Plant and Equipment Assets of BP’s 2006 Annual Report. Using the information provided in the note, please answer the questions below. All numbers in the questions below and the footnote are in $ million.

1. How much did BP pay to purchase/develop additional Oil and Gas Properties in 2006?

2. Assume that BP received a total of $400 in cash from selling Oil and Gas Properties.

• At the time of sale, what was the accumulated depreciation on the Oil and Gas Properties that were sold?
• Calculate the total amount of gain or loss that BP recognized on these asset sales.

 

26 Property, plant and equipment

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 Part V: Fixed Assets of Dow Jones

Use the attached balance sheet for the year 2006 to answer the following questions about long-term assets. All numbers in the questions below and the balance sheet are in $ thousands.

1. How much did Dow Jones originally pay for all the equipment that it owned as of December 31st, 2006?

2. Assuming that no Buildings (and Improvements) were sold during the year 2006, how much did Dow Jones pay to purchase/improve buildings during the year?

3. Assume that Dow Jones had purchased $155,000 in additional equipment and recorded total depreciation expenses of $122,000 during the fiscal year 2006. Also, assume that the only thing that the Dow Jones sold was one piece of printing equipment for $190,000 in cash.

 

• How much did the Dow Jones originally pay for the piece of equipment that was sold?
• At the time of sale, what was the accumulated depreciation on the piece of equipment that was sold?
• Did Dow Jones record a gain or a loss on the sale of the printing equipment?

 

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

		As of December 31
		2006			2005
Assets
Current Assets:
Cash and cash equivalents	$	13,237		$	10,633
AAccounts receivable – trade, net of allowance for doubtful accounts of $5,390 in 2006 and $5,870 in 2005		224,642			195,790
Accounts receivable – other		18,313			22,584
Newsprint inventory		5,081			7,875
Current assets of discontinued operations		–			10,448
Prepaid expenses		26,621			22,382
Deferred income taxes		25,754			14,459
Total current assets		313,648			284,171
Investments in associated companies, at equity		19,302			30,074
Other investments		5,151			7,083
Plant, property and equipment, at cost:
Land		22,763			23,046
Buildings and improvements		455,883			452,521
Equipment		1,181,171			1,177,300
Construction in progress		66,650			17,928
		1,726,467			1,670,795
Less, accumulated depreciation		1,087,695			1,054,398
Plant, property and equipment, net		638,772			616,397
Goodwill		754,310			609,695
Other intangible assets, less accumulated amortization		196,901			135,265
of $32,375 in 2006 and $20,370 in 2005
Deferred income taxes		16,203			44,179
Long-term assets of discontinued operations		–			43,371
Other assets		11,275			11,737
Total assets	$	1,955,562		$	1,781,972
The accompanying notes are an integral part of the consolidated financial statements.