2024 - Top Of Form 1 TCO A Below You Will Find Selected Information In Millions From Coca Cola Co S 2012

Finance Final Exam – 2024

Top of Form

(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; Current Ratio, Days in Inventory, Average Collection Period, Return on Assets Ratio, Debt to Total Assets and Return on common stockholders’ equity ratio. (Make sure to show all your work)

(Points : 36)

(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 operating, investing, and financing sections 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.

(Points : 36)

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)?

(Points : 36)

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.

(Points : 36)

Page 1

1. (TCO A) An advantage of the corporate form of business is that _____. (Points : 5)

      [removed] it has limited life
      [removed] its owner’s personal resources are at stake
      [removed] its ownership is easily transferable via the sale of shares of stock
      [removed] it is simple to establish

2. (TCO A) The Dividends account _____. (Points : 5)

      [removed] is increased with a debit
      [removed] is decreased with a credit
      [removed] is not an expense account
      [removed] All of the above

3. (TCOs A, B) Below is a partial list of account balances for Cerner Company:

Cash                           $5,000
Prepaid insurance             500
Accounts receivable       2,500
Accounts payable          2,000
Notes payable               3,000
Common stock              1,000
Dividends                         500
Revenues                    15,000
Expenses                    12,500

What did Cerner Company show as total credits? (Points : 5)

      [removed] $21,500
      [removed] $21,000
      [removed] $20,500
      [removed] $22,000

4. (TCOs B, E) Under the accrual basis of accounting, _____. (Points : 5)

      [removed] cash must be received before revenue is recognized
      [removed] net income is calculated by matching cash outflows against cash inflows
      [removed] events that change a company’s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received
      [removed] the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles

5. (TCO D) Two companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)

      [removed] LIFO will have the highest ending inventory
      [removed] FIFO will have the highest cost of goods sold
      [removed] FIFO will have the highest ending inventory
      [removed] LIFO will have the lowest cost of goods sold

6. (TCO A, E) Equipment was purchased for $17,000 on January 1, 2006. Freight charges amounted to $700 and there was a cost of $2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $3,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2007, if the straight-line method of depreciation is used? (Points : 5)

      [removed] $6,680
      [removed] $3,340
      [removed] $2,860
      [removed] $5,720

7. (TCOs D, G) Lopez Corporation issues 500 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 96. The journal entry to record the issuance will show a _____. (Points : 5)

      [removed] debit to Cash of $500,000
      [removed] credit to Discount on Bonds Payable for $20,000
      [removed] credit to Bonds Payable for $480,000
      [removed] debit to Cash for $480,000

8. (TCO C) Accounts receivable arising from sales to customers amounted to $40,000 and $35,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $110,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)

      [removed] $110,000
      [removed] $105,000
      [removed] $115,000
      [removed] $150,000

9. (TCO F) One variation of the horizontal analysis is known as _____. (Points : 5)

      [removed] nonlinear analysis
      [removed] vertical analysis
      [removed] trend analysis
      [removed] common-size analysis

10. (TCO F) In a common-size balance sheet, the 100% figure is _____. (Points : 5)

      [removed] total current assets
      [removed] total property, plant, and equipment
      [removed] total liabilities
      [removed] total assets

11. (TCO F) Which one of the following is not a characteristic generally evaluated in ratio analysis? (Points : 5)

      [removed] Liquidity
      [removed] Profitability
      [removed] Marketability of the product
      [removed] Solvency

12. (TCO F) A common measure of profitability is the _____. (Points : 5)

      [removed] current ratio
      [removed] current cash debt coverage ratio
      [removed] return on common stockholder’s equity ratio
      [removed] debt to total assets

13. (TCO F) Return on common stockholder’s equity ratio is affected by _____. (Points : 5)

      [removed] net income
      [removed] dividend paid to preferred stock, if any
      [removed] leverage (debt-to-assets ratio)
      [removed] All of the above

14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

      [removed] find out the present value of all of the future cash payments promised by the bond
      [removed] calculate the present value of the principal only
      [removed] calculate the present value of the interest only
      [removed] multiply the bond price by the interest rate

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2024 – Top of Form 1 TCO A Below you will find selected information in millions from Coca Cola Co s 2012

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