ACCT 5

Exercise 12-1

Putnam Corporation had these transactions during 2014.
Analyze the transactions and indicate whether each transaction resulted in a cash flow from operating activities, investing activities, financing activities, or noncash investing and financing activities.

(a)		Purchased a machine for $30,000, giving a long-term note in exchange.

(b)		Issued $50,000 par value common stock for cash.

(c)		Issued $200,000 par value common stock upon conversion of bonds having a face value of $200,000.

(d)		Declared and paid a cash dividend of $13,000.

(e)		Sold a long-term investment with a cost of $15,000 for $15,000 cash.

(f)		Collected $16,000 of accounts receivable.

(g)		Paid $18,000 on accounts payable.

IFRS 13-1

Ling Company reports the following information for the year ended December 31, 2014: sales revenue $1,000,000, cost of goods sold $700,000, operating expenses $200,000, and an unrealized gain on non-trading securities of $75,000. Prepare a statement of comprehensive income using the one-statement approach.

LING COMPANY Statement of Comprehensive Income For the Year Ended December 31, 2014
			$






			$

Problem 12-9A

Condensed financial data of Odgers Inc. follow.

ODGERS INC. Comparative Balance Sheets December 31
Assets	2014	2013
Cash	$ 127,664	$ 76,472
Accounts receivable	138,724	60,040
Inventory	177,750	162,503
Prepaid expenses	44,872	41,080
Long-term investments	218,040	172,220
Plant assets	450,300	383,150
Accumulated depreciation	(79,000	(82,160
Total	$1,078,350	$813,305

Liabilities and Stockholders’ Equity
Accounts payable	$ 161,160	$ 106,334
Accrued expenses payable	26,070	33,180
Bonds payable	173,800	230,680
Common stock	347,600	276,500
Retained earnings	369,720	166,611
Total	$1,078,350	$813,305

ODGERS INC. Income Statement Data For the Year Ended December 31, 2014
Sales revenue		$613,767
Less:
Cost of goods sold	$214,027
Operating expenses, excluding depreciation	19,608
Depreciation expense	73,470
Income tax expense	43,102
Interest expense	7,473
Loss on disposal of plant assets	11,850	369,530
Net income		$ 244,237

Additional information:

1.		New plant assets costing $158,000 were purchased for cash during the year.
2.		Old plant assets having an original cost of $90,850 and accumulated depreciation of $76,630 were sold for $2,370 cash.
3.		Bonds payable matured and were paid off at face value for cash.
4.		A cash dividend of $41,128 was declared and paid during the year.

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

ODGERS INC. Statement of Cash Flows For the Year Ended December 31, 2014

		$
Adjustments to reconcile net income to

	$























		$

Problem 12-10A

Condensed financial data of Odgers Inc. follow.

ODGERS INC. Comparative Balance Sheets December 31
Assets	2014	2013
Cash	$ 151,904	$ 90,992
Accounts receivable	165,064	71,440
Inventory	211,500	193,358
Prepaid expenses	53,392	48,880
Long-term investments	259,440	204,920
Plant assets	535,800	455,900
Accumulated depreciation	(94,000	(97,760
Total	$1,283,100	$967,730

Liabilities and Stockholders’ Equity
Accounts payable	$ 191,760	$ 126,524
Accrued expenses payable	31,020	39,480
Bonds payable	206,800	274,480
Common stock	413,600	329,000
Retained earnings	439,920	198,246
Total	$1,283,100	$967,730

ODGERS INC. Income Statement Data For the Year Ended December 31, 2014
Sales revenue		$730,305
Less:
Cost of goods sold	$254,665
Operating expenses, excluding depreciation	23,331
Depreciation expense	87,420
Income taxes	51,286
Interest expense	8,892
Loss on disposal of plant assets	14,100	439,694
Net income		$ 290,611

Additional information:

1.		New plant assets costing $188,000 were purchased for cash during the year.
2.		Old plant assets having an original cost of $108,100 and accumulated depreciation of $91,180 were sold for $2,820 cash.
3.		Bonds payable matured and were paid off at face value for cash.
4.		A cash dividend of $48,937 was declared and paid during the year.

Further analysis reveals that accounts payable pertain to merchandise creditors.
Prepare a statement of cash flows for Odgers Inc. using the direct method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

ODGERS INC. Statement of Cash Flows For the Year Ended December 31, 2014

		$
:
	$




















		$

Problem 13-2A

The comparative statements of Osborne Company are presented here.

OSBORNE COMPANY Income Statements For the Years Ended December 31
	2014	2013
Net sales	$1,895,805	$1,755,765
Cost of goods sold	1,063,805	1,011,265
Gross profit	832,000	744,500
Selling and administrative expenses	505,265	484,265
Income from operations	326,735	260,235
Other expenses and losses
Interest expense	23,104	21,104
Income before income taxes	303,631	239,131
Income tax expense	93,104	74,104
Net income	$ 210,527	$ 165,027

OSBORNE COMPANY Balance Sheets December 31
Assets	2014	2013
Current assets
Cash	$ 60,100	$ 64,200
Debt investments (short-term)	74,000	50,000
Accounts receivable	123,065	108,065
Inventory	127,104	116,604
Total current assets	384,269	338,869
Plant assets (net)	662,473	533,773
Total assets	$1,046,742	$872,642
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$ 165,265	$150,665
Income taxes payable	44,604	43,104
Total current liabilities	209,869	193,769
Bonds payable	233,473	213,473
Total liabilities	443,342	407,242
Stockholders’ equity
Common stock ($5 par)	290,000	300,000
Retained earnings	313,400	165,400
Total stockholders’ equity	603,400	465,400
Total liabilities and stockholders’ equity	$1,046,742	$872,642

All sales were on account. Net cash provided by operating activities for 2014 was $233,480. Capital expenditures were $135,410, and cash dividends were $62,527.
Compute the following ratios for 2014. (Round all answers to 2 decimal places, e.g. 1.83 or 12.61%.)

(a)	Earnings per share	$
(b)	Return on common stockholders’ equity		%
(c)	Return on assets		%
(d)	Current ratio		:1
(e)	Accounts receivable turnover		times
(f)	Average collection period		days
(g)	Inventory turnover		times
(h)	Days in inventory		days
(i)	Times interest earned		times
(j)	Asset turnover		times
(k)	Debt to assets		%
(l)	Current cash debt coverage		times
(m)	Cash debt coverage		times
(n)	Free cash flow	$

Exercise 7-3

The following control procedures are used in Kelton Company for over-the-counter cash receipts.
(a) For each procedure, explain the weakness in internal control and identify the control principle that is violated.

Procedure

Weakness

Principle Violated

Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy.

All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer.

To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked attaché case in the stock room until it is deposited in the bank.

At the end of each day the total receipts are counted by the cashier on duty and reconciled to the cash register total.

The company accountant makes the bank deposit and then records the day’s receipts.

Broadening Your Perspective 13-2

The financial statements of The Hershey Company and Tootsie Roll are presented below.

THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31,	2011	2010	2009
In thousands of dollars except per share amounts
Net Sales	$6,080,788	$5,671,009	$5,298,668
Costs and Expenses:
Cost of sales	3,548,896	3,255,801	3,245,531
Selling, marketing and administrative	1,477,750	1,426,477	1,208,672
Business realignment and impairment (credits) charges, net	(886	83,433	82,875
Total costs and expenses	5,025,760	4,765,711	4,537,078
Income before Interest and Income Taxes	1,055,028	905,298	761,590
Interest expense, net	92,183	96,434	90,459
Income before Income Taxes	962,845	808,864	671,131
Provision for income taxes	333,883	299,065	235,137
Net Income	$628,962	$509,799	$435,994
Net Income Per Share—Basic—Class B Common Stock	$2.58	$2.08	$1.77
Net Income Per Share—Diluted—Class B Common Stock	$2.56	$2.07	$1.77
Net Income Per Share—Basic—Common Stock	$2.85	$2.29	$1.97
Net Income Per Share—Diluted—Common Stock	$2.74	$2.21	$1.90
Cash Dividends Paid Per Share:
Common Stock	$1.3800	$1.2800	$1.1900
Class B Common Stock	1.2500	1.1600	1.0712
The notes to consolidated financial statements are an integral part of these statements and are included in the Hershey's 2011 Annual Report, available at www.thehersheycompany.com.

THE HERSHEY COMPANY CONSOLIDATED BALANCE SHEETS
December 31,	2011	2010
In thousands of dollars
ASSETS
Current Assets:
Cash and cash equivalents	$693,686	$884,642
Accounts receivable—trade	399,499	390,061
Inventories	648,953	533,622
Deferred income taxes	136,861	55,760
Prepaid expenses and other	167,559	141,132
Total current assets	2,046,558	2,005,217
Property, Plant and Equipment, Net	1,559,717	1,437,702
Goodwill	516,745	524,134
Other Intangibles	111,913	123,080
Deferred Income Taxes	38,544	21,387
Other Assets	138,722	161,212
Total assets	$4,412,199	$4,272,732
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$420,017	$410,655
Accrued liabilities	612,186	593,308
Accrued income taxes	1,899	9,402
Short-term debt	42,080	24,088
Current portion of long-term debt	97,593	261,392
Total current liabilities	1,173,775	1,298,845
Long-term Debt	1,748,500	1,541,825
Other Long-term Liabilities	617,276	494,461
Total liabilities	3,539,551	3,335,131
Commitments and Contingencies	—	—
Stockholders’ Equity:
The Hershey Company Stockholders’ Equity
Preferred Stock, shares issued: none in 2011 and 2010	—	—
Common Stock, shares issued: 299,269,702 in 2011 and 299,195,325 in 2010	299,269	299,195
Class B Common Stock, shares issued: 60,632,042 in 2011 and 60,706,419 in 2010	60,632	60,706
Additional paid-in capital	490,817	434,865
Retained earnings	4,699,597	4,374,718
Treasury—Common Stock shares, at cost: 134,695,826 in 2011 and 132,871,512 in 2010	(4,258,962	(4,052,101
Accumulated other comprehensive loss	(442,331	(215,067
The Hershey Company stockholders’ equity	849,022	902,316
Noncontrolling interests in subsidiaries	23,626	35,285
Total stockholders’ equity	872,648	937,601
Total liabilities and stockholders’equity	$4,412,199	$4,272,732

THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,			2011			2010			2009
In thousands of dollars
Cash Flows Provided from (Used by) Operating Activities
	Net income	$628,962		$509,799			$435,994
	Adjustments to reconcile net income to net cash provided from operations:
	Depreciation and amortization	215,763		197,116			182,411
	Stock-based compensation expense, net of tax of $15,127, $17,413 and $19,223, respectively	28,341		32,055			34,927
	Excess tax benefits from stock-based compensation	(13,997		(1,385			(4,455
	Deferred income taxes	33,611		(18,654			(40,578
	Gain on sale of trademark licensing rights, net of tax of $5,962	(11,072		—			—
	Business realignment and impairment charges, net of tax of $18,333, $20,635 and $38,308, respectively	30,838		77,935			60,823
	Contributions to pension plans	(8,861		(6,073			(54,457
	Changes in assets and liabilities, net of effects from business acquisitions and divestitures:
	Accounts receivable—trade	(9,438		20,329			46,584
	Inventories	(115,331		(13,910			74,000
	Accounts payable	7,860		90,434			37,228
	Other assets and liabilities	(205,809		13,777			293,272
Net Cash Provided from Operating Activities			580,867		901,423			1,065,749
Cash Flows Provided from (Used by) Investing Activities
	Capital additions	(323,961		(179,538			(126,324
	Capitalized software additions	(23,606		(21,949			(19,146
	Proceeds from sales of property, plant and equipment	312		2,201			10,364
	Proceeds from sales of trademark licensing rights	20,000		—			—
	Business acquisitions	(5,750		—			(15,220
Net Cash (Used by) Investing Activities			(333,005		(199,286			(150,326
Cash Flows Provided from (Used by) Financing Activities
	Net change in short-term borrowings	10,834		1,156			(458,047
	Long-term borrowings	249,126		348,208			—
	Repayment of long-term debt	(256,189		(71,548			(8,252
	Proceeds from lease financing agreement	47,601		—			—
	Cash dividends paid	(304,083		(283,434			(263,403
	Exercise of stock options	184,411		92,033			28,318
	Excess tax benefits from stock-based compensation	13,997		1,385			4,455
	Contributions from noncontrolling interests in subsidiaries	—		10,199			7,322
	Repurchase of Common Stock	(384,515		(169,099			(9,314
Net Cash (Used by) Financing Activities			(438,818		(71,100			(698,921
(Decrease) Increase in Cash and Cash Equivalents			(190,956		631,037			216,502
Cash and Cash Equivalents as of January 1			884,642		253,605			37,103
Cash and Cash Equivalents as of December 31			$693,686		$884,642			$253,605
Interest Paid			$97,892		$97,932			$91,623
Income Taxes Paid			292,315		350,948			252,230

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data)
		For the year ended December 31,
		2011	2010	2009
	Net product sales	$528,369	$517,149	$495,592
	Rental and royalty revenue	4,136	4,299	3,739
	Total revenue	532,505	521,448	499,331
	Product cost of goods sold	365,225	349,334	319,775
	Rental and royalty cost	1,038	1,088	852
	Total costs	366,263	350,422	320,627
	Product gross margin	163,144	167,815	175,817
	Rental and royalty gross margin	3,098	3,211	2,887
	Total gross margin	166,242	171,026	178,704
	Selling, marketing and administrative expenses	108,276	106,316	103,755
	Impairment charges	—	—	14,000
	Earnings from operations	57,966	64,710	60,949
	Other income (expense), net	2,946	8,358	2,100
	Earnings before income taxes	60,912	73,068	63,049
	Provision for income taxes	16,974	20,005	9,892
	Net earnings	$43,938	$53,063	$53,157

	Net earnings	$43,938	$53,063	$53,157
	Other comprehensive earnings (loss)	(8,740	1,183	2,845
	Comprehensive earnings	$35,198	$54,246	$56,002

	Retained earnings at beginning of year.	$135,866	$147,687	$144,949
	Net earnings	43,938	53,063	53,157
	Cash dividends	(18,360	(18,078	(17,790
	Stock dividends	(47,175	(46,806	(32,629
	Retained earnings at end of year	$114,269	$135,866	$147,687

	Earnings per share	$0.76	$0.90	$0.89

	Average Common and Class B Common shares outstanding	57,892	58,685	59,425
(The accompanying notes are an integral part of these statements.)

CONSOLIDATED STATEMENTS OF Financial Position TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)
Assets			December 31,
		2011		2010
CURRENT ASSETS:
	Cash and cash equivalents	$78,612		$115,976
	Investments	10,895		7,996
	Accounts receivable trade, less allowances of $1,731 and $1,531	41,895		37,394
	Other receivables	3,391		9,961
	Inventories:
	Finished goods and work-in-process	42,676		35,416
	Raw materials and supplies	29,084		21,236
	Prepaid expenses	5,070		6,499
	Deferred income taxes	578		689
	Total current assets	212,201		235,167
PROPERTY, PLANT AND EQUIPMENT, at cost:
	Land	21,939		21,696
	Buildings	107,567		102,934
	Machinery and equipment	322,993		307,178
	Construction in progress	2,598		9,243
		455,097		440,974
	Less—Accumulated depreciation	242,935		225,482
	Net property, plant and equipment	212,162		215,492
OTHER ASSETS:
	Goodwill	73,237		73,237
	Trademarks	175,024		175,024
	Investments	96,161		64,461
	Split dollar officer life insurance	74,209		74,441
	Prepaid expenses	3,212		6,680
	Equity method investment	3,935		4,254
	Deferred income taxes	7,715		9,203
	Total other assets	433,493		407,300
	Total assets	$857,856		$857,959
Liabilities and Shareholders’ Equity			December 31,
		2011		2010
CURRENT LIABILITIES:
	Accounts payable	$10,683		$9,791
	Dividends payable	4,603		4,529
	Accrued liabilities	43,069		44,185
	Total current liabilities	58,355		58,505
NONCURRENT LIABILITES:
	Deferred income taxes	43,521		47,865
	Postretirement health care and life insurance benefits	26,108		20,689
	Industrial development bonds	7,500		7,500
	Liability for uncertain tax positions	8,345		9,835
	Deferred compensation and other liabilities	48,092		46,157
	Total noncurrent liabilities	133,566		132,046
SHAREHOLDERS’ EQUITY:
	Common stock, $.69-4/9 par value—120,000 shares authorized—36,479 and 36,057 respectively, issued	25,333		25,040
	Class B common stock, $.69-4/9 par value—40,000 shares authorized—21,025 and 20,466 respectively, issued	14,601		14,212
	Capital in excess of par value	533,677		505,495
	Retained earnings, per accompanying statement	114,269		135,866
	Accumulated other comprehensive loss	(19,953		(11,213
	Treasury stock (at cost)—71 shares and 69 shares, respectively	(1,992		(1,992
	Total shareholders’ equity	665,935		667,408
	Total liabilities and shareholders’ equity	$857,856		$857,959

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF Cash Flows (in thousands)
				For the year ended December 31,
				2011	2010	2009
	CASH FLOWS FROM OPERATING ACTIVITIES:
		Net earnings		$43,938	$53,063	$53,157
		Adjustments to reconcile net earnings to net cash provided by operating activities:
			Depreciation	19,229	18,279	17,862
			Impairment charges	—	—	14,000
			Impairment of equity method investment	—	—	4,400
			Loss from equity method investment	194	342	233
			Amortization of marketable security premiums	1,267	522	320
			Changes in operating assets and liabilities:
			Accounts receivable	(5,448	717	(5,899
			Other receivables	3,963	(2,373	(2,088
			Inventories	(15,631	(1,447	455
			Prepaid expenses and other assets	5,106	4,936	5,203
			Accounts payable and accrued liabilities	84	2,180	(2,755
			Income taxes payable and deferred	(5,772	2,322	(12,543
			Postretirement health care and life insurance benefits	2,022	1,429	1,384
			Deferred compensation and other liabilities	2,146	2,525	2,960
			Others	(708	310	305
		Net cash provided by operating activities		50,390	82,805	76,994
	CASH FLOWS FROM INVESTING ACTIVITIES:
			Capital expenditures	(16,351	(12,813	(20,831
			Net purchase of trading securities	(3,234	(2,902	(1,713
			Purchase of available for sale securities	(39,252	(9,301	(11,331
			Sale and maturity of available for sale securities	7,680	8,208	17,511
			Net cash used in investing activities	(51,157	(16,808	(16,364
	CASH FLOWS FROM FINANCING ACTIVITIES:
			Shares repurchased and retired	(18,190	(22,881	(20,723
			Dividends paid in cash	(18,407	(18,130	(17,825
			Net cash used in financing activities	(36,597	(41,011	(38,548
	Increase (decrease) in cash and cash equivalents			(37,364	24,986	22,082
	Cash and cash equivalents at beginning of year			115,976	90,990	68,908
	Cash and cash equivalents at end of year			$78,612	$115,976	$90,990
	Supplemental cash flow information
			Income taxes paid	$16,906	$20,586	$22,364
			Interest paid	$38	$49	$182
			Stock dividend issued	$47,053	$46,683	$32,538
(The accompanying notes are an integral part of these statements.)

Based on the information in the financial statements, determine each of the following for each company:

The percentage increase (i) in net sales and (ii) in net income from 2010 to 2011. (Round answers to 1 decimal places, e.g. 15.2%. Enter negative amounts using either a negative sign preceding the number e.g. -15.2% or parentheses e.g. (15.2)%.)

	Hershey	Tootsie Roll
Percentage increase (decrease) in net sales
Percentage increase (decrease) in net income

SHOW SOLUTION

The percentage increase (i) in total assets and (ii) in total stockholders’ equity from 2010 to 2011. (Round answers to 1 decimal place, e.g. 15.2%. Enter negative amounts using either a negative sign preceding the number e.g. -15.2% or parentheses e.g. (15.2)%.)

	Hershey	Tootsie Roll
Percentage increase (decrease) in total assets
Percentage increase (decrease) in total stockholders’ equity

SHOW SOLUTION

The earnings per share for 2011. (Round answers to 2 decimal places, e.g. 15.25.)

	Hershey	Tootsie Roll
Earnings per share