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QUESTION

Feb 02, 2017

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.

Operating ActivitiesInvesting ActivitiesFinancing ActivitiesNoncash Investing and Financing Activities

(b)

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

Investing ActivitiesOperating ActivitiesNoncash Investing and Financing ActivitiesFinancing Activities

(c)

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

Noncash Investing and Financing ActivitiesOperating ActivitiesFinancing ActivitiesInvesting Activities

(d)

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

Noncash Investing and Financing ActivitiesOperating ActivitiesInvesting ActivitiesFinancing Activities

(e)

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

Operating ActivitiesNoncash Investing and Financing ActivitiesFinancing ActivitiesInvesting Activities

(f)

Collected $16,000 of accounts receivable.

Financing ActivitiesNoncash Investing and Financing ActivitiesInvesting ActivitiesOperating Activities

(g)

Paid $18,000 on accounts payable.

Financing ActivitiesNoncash Investing and Financing ActivitiesInvesting ActivitiesOperating Activities

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

Gross profitOperating expensesUnrealized gain on non-trading securitiesSales revenueNet incomeComprehensive incomeCost of goods soldOther comprehensive income

Operating expensesSales revenueUnrealized gain on non-trading securitiesComprehensive incomeOther comprehensive incomeGross profitCost of goods soldNet income

Other comprehensive incomeOperating expensesUnrealized gain on non-trading securitiesComprehensive incomeSales revenueCost of goods soldGross profitNet income

Operating expensesNet incomeOther comprehensive incomeComprehensive incomeCost of goods soldUnrealized gain on non-trading securitiesSales revenueGross profit

Net incomeGross profitOperating expensesComprehensive incomeSales revenueOther comprehensive incomeUnrealized gain on non-trading securitiesCost of goods sold

Gross profitOther comprehensive incomeCost of goods soldUnrealized gain on non-trading securitiesOperating expensesNet incomeComprehensive incomeSales revenue

Operating expensesNet incomeUnrealized gain on non-trading securitiesSales revenueCost of goods soldComprehensive incomeOther comprehensive incomeGross profit

Comprehensive incomeSales revenueOther comprehensive incomeUnrealized gain on non-trading securitiesCost of goods soldGross profitNet incomeOperating expenses

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:

New plant assets costing $158,000 were purchased for cash during the year.

Old plant assets having an original cost of $90,850 and accumulated depreciation of $76,630 were sold for $2,370 cash.

Bonds payable matured and were paid off at face value for cash.

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

Cash at Beginning of PeriodCash at End of PeriodCash Flows from Financing ActivitiesCash Flows from Investing ActivitiesCash Flows from Operating ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Provided by Operating ActivitiesNet Cash used by Financing ActivitiesNet Cash used by Investing ActivitiesNet Cash used by Operating ActivitiesNet Decrease in CashNet Increase in Cash

Payment of Cash DividendsDecrease in Prepaid ExpensesDecrease in Accounts ReceivableIncrease in Accrued Expenses PayableIncrease in InventoryDecrease in Accrued Expenses PayablePurchase of Plant AssetsDecrease in InventoryIncrease in Prepaid ExpensesDepreciation ExpenseIncrease in Accounts ReceivableLoss on Disposal of Plant AssetsRedemption of BondsSale of Plant AssetsPurchase of InvestmentsSale of Common StockIncrease in Accounts PayableNet IncomeDecrease in Accounts Payable

Adjustments to reconcile net income to

Sale of Plant AssetsDecrease in Accrued Expenses PayableIncrease in InventoryDecrease in InventorySale of Common StockPurchase of Plant AssetsIncrease in Accrued Expenses PayableIncrease in Prepaid ExpensesDepreciation ExpensePayment of Cash DividendsDecrease in Accounts ReceivableDecrease in Prepaid ExpensesIncrease in Accounts ReceivableIncrease in Accounts PayableRedemption of BondsNet IncomeLoss on Disposal of Plant AssetsDecrease in Accounts PayablePurchase of Investments

Increase in InventoryLoss on Disposal of Plant AssetsPurchase of InvestmentsPurchase of Plant AssetsDecrease in InventoryNet IncomePayment of Cash DividendsIncrease in Accounts ReceivableRedemption of BondsDepreciation ExpenseSale of Common StockIncrease in Accounts PayableDecrease in Accounts PayableSale of Plant AssetsDecrease in Prepaid ExpensesDecrease in Accrued Expenses PayableIncrease in Accrued Expenses PayableDecrease in Accounts ReceivableIncrease in Prepaid Expenses

Increase in Accounts ReceivablePurchase of Plant AssetsDecrease in InventoryDecrease in Accounts ReceivableLoss on Disposal of Plant AssetsSale of Common StockDecrease in Accrued Expenses PayableSale of Plant AssetsPurchase of InvestmentsPayment of Cash DividendsIncrease in Accrued Expenses PayableIncrease in Prepaid ExpensesRedemption of BondsNet IncomeDecrease in Prepaid ExpensesIncrease in InventoryDepreciation ExpenseIncrease in Accounts PayableDecrease in Accounts Payable

Loss on Disposal of Plant AssetsIncrease in Accrued Expenses PayableSale of Plant AssetsDecrease in InventoryPurchase of InvestmentsIncrease in Prepaid ExpensesIncrease in InventoryPayment of Cash DividendsRedemption of BondsDecrease in Accounts PayableDecrease in Accrued Expenses PayableDepreciation ExpenseSale of Common StockNet IncomePurchase of Plant AssetsIncrease in Accounts PayableIncrease in Accounts ReceivableDecrease in Prepaid ExpensesDecrease in Accounts Receivable

Depreciation ExpenseDecrease in Prepaid ExpensesDecrease in Accounts ReceivableLoss on Disposal of Plant AssetsPurchase of InvestmentsSale of Plant AssetsPurchase of Plant AssetsDecrease in Accrued Expenses PayableIncrease in InventoryNet IncomeRedemption of BondsIncrease in Accounts PayableIncrease in Prepaid ExpensesDecrease in Accounts PayableSale of Common StockDecrease in InventoryIncrease in Accrued Expenses PayableIncrease in Accounts ReceivablePayment of Cash Dividends

Increase in Accounts ReceivableIncrease in Accounts PayablePayment of Cash DividendsPurchase of Plant AssetsDecrease in Accounts PayableDecrease in Accounts ReceivableDepreciation ExpenseIncrease in InventoryIncrease in Accrued Expenses PayableSale of Plant AssetsDecrease in InventoryPurchase of InvestmentsIncrease in Prepaid ExpensesNet IncomeLoss on Disposal of Plant AssetsDecrease in Accrued Expenses PayableSale of Common StockDecrease in Prepaid ExpensesRedemption of Bonds

Decrease in Accrued Expenses PayableLoss on Disposal of Plant AssetsSale of Common StockIncrease in Prepaid ExpensesRedemption of BondsNet IncomeDecrease in Prepaid ExpensesDepreciation ExpensePayment of Cash DividendsIncrease in Accounts PayableDecrease in Accounts ReceivableIncrease in InventoryDecrease in Accounts PayableIncrease in Accrued Expenses PayableDecrease in InventoryIncrease in Accounts ReceivableSale of Plant AssetsPurchase of InvestmentsPurchase of Plant Assets

Net IncomeDecrease in InventoryDecrease in Prepaid ExpensesPurchase of InvestmentsPurchase of Plant AssetsDepreciation ExpensePayment of Cash DividendsRedemption of BondsIncrease in Accounts PayableSale of Common StockLoss on Disposal of Plant AssetsIncrease in Accounts ReceivableDecrease in Accounts PayableDecrease in Accounts ReceivableDecrease in Accrued Expenses PayableIncrease in Accrued Expenses PayableIncrease in InventorySale of Plant AssetsIncrease in Prepaid Expenses

Increase in Prepaid ExpensesDecrease in InventoryPurchase of Plant AssetsDecrease in Accrued Expenses PayablePayment of Cash DividendsIncrease in Accrued Expenses PayableSale of Common StockRedemption of BondsSale of Plant AssetsIncrease in Accounts PayableDecrease in Prepaid ExpensesNet IncomeDepreciation ExpenseDecrease in Accounts PayableIncrease in InventoryIncrease in Accounts ReceivableLoss on Disposal of Plant AssetsDecrease in Accounts ReceivablePurchase of Investments

Decrease in Accounts PayableSale of Plant AssetsRedemption of BondsDecrease in Accounts ReceivableIncrease in Accounts ReceivablePurchase of InvestmentsIncrease in Prepaid ExpensesPayment of Cash DividendsDecrease in Prepaid ExpensesDecrease in Accrued Expenses PayableNet IncomeLoss on Disposal of Plant AssetsIncrease in Accrued Expenses PayableIncrease in InventoryDecrease in InventoryPurchase of Plant AssetsIncrease in Accounts PayableSale of Common StockDepreciation Expense

Increase in Accounts PayableRedemption of BondsDecrease in InventoryNet IncomeIncrease in Accounts ReceivableIncrease in Accrued Expenses PayableLoss on Disposal of Plant AssetsDepreciation ExpenseDecrease in Accounts ReceivableSale of Common StockPayment of Cash DividendsDecrease in Accrued Expenses PayableDecrease in Accounts PayableIncrease in Prepaid ExpensesDecrease in Prepaid ExpensesSale of Plant AssetsPurchase of InvestmentsIncrease in InventoryPurchase of Plant Assets

Sale of Common StockDecrease in Accounts PayableIncrease in Accounts PayableDecrease in Prepaid ExpensesIncrease in InventoryDecrease in InventoryNet IncomeIncrease in Accounts ReceivableLoss on Disposal of Plant AssetsDepreciation ExpenseSale of Plant AssetsPurchase of InvestmentsIncrease in Prepaid ExpensesDecrease in Accounts ReceivablePurchase of Plant AssetsPayment of Cash DividendsRedemption of BondsDecrease in Accrued Expenses PayableIncrease in Accrued Expenses Payable

Increase in InventoryIncrease in Accrued Expenses PayableSale of Plant AssetsPurchase of Plant AssetsSale of Common StockIncrease in Prepaid ExpensesDecrease in InventoryDecrease in Prepaid ExpensesPayment of Cash DividendsIncrease in Accounts ReceivableRedemption of BondsDecrease in Accounts ReceivablePurchase of InvestmentsNet IncomeDepreciation ExpenseIncrease in Accounts PayableDecrease in Accounts PayableLoss on Disposal of Plant AssetsDecrease in Accrued Expenses Payable

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:

New plant assets costing $188,000 were purchased for cash during the year.

Old plant assets having an original cost of $108,100 and accumulated depreciation of $91,180 were sold for $2,820 cash.

Bonds payable matured and were paid off at face value for cash.

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 wih 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

Purchase of InvestmentsFor Operating ExpensesSale of Common StockCash Receipts from CustomersFor Income TaxesFor InterestSale of Plant AssetsPayment of Cash DividendsPurchase of Plant AssetsRedemption of BondsTo Suppliers

LessAdd: Sale of Common StockTo SuppliersSale of Plant AssetsRedemption of BondsPurchase of Plant AssetsCash PaymentsPayment of Cash DividendsPurchase of InvestmentsCash Receipts from CustomersFor Income TaxesFor Operating ExpensesFor Interest

To SuppliersFor Income TaxesCash Receipts from CustomersPayment of Cash DividendsCash PaymentsRedemption of BondsFor Operating ExpensesSale of Common StockPurchase of InvestmentsFor InterestSale of Plant AssetsPurchase of Plant Assets

Cash PaymentsPayment of Cash DividendsTo SuppliersFor Operating ExpensesFor InterestSale of Plant AssetsPurchase of InvestmentsFor Income TaxesPurchase of Plant AssetsSale of Common StockRedemption of BondsCash Receipts from Customers

Cash Receipts from CustomersSale of Common StockFor Operating ExpensesCash PaymentsTo SuppliersFor Income TaxesRedemption of BondsPurchase of Plant AssetsFor InterestSale of Plant AssetsPurchase of InvestmentsPayment of Cash Dividends

Sale of Plant AssetsSale of Common StockTo SuppliersCash PaymentsCash Receipts from CustomersPayment of Cash DividendsFor Income TaxesPurchase of Plant AssetsFor Operating ExpensesFor InterestRedemption of BondsPurchase of Investments

Payment of Cash DividendsFor Income TaxesPurchase of Plant AssetsFor Operating ExpensesRedemption of BondsFor InterestSale of Plant AssetsCash PaymentsCash Receipts from CustomersPurchase of InvestmentsSale of Common StockTo Suppliers

Cash Receipts from CustomersRedemption of BondsCash PaymentsTo SuppliersFor Income TaxesFor Operating ExpensesSale of Common StockFor InterestPayment of Cash DividendsPurchase of InvestmentsSale of Plant AssetsPurchase of Plant Assets

For InterestPayment of Cash DividendsSale of Plant AssetsPurchase of InvestmentsRedemption of BondsPurchase of Plant AssetsSale of Common StockCash PaymentsCash Receipts from CustomersTo SuppliersFor Income TaxesFor Operating Expenses

To SuppliersRedemption of BondsPurchase of InvestmentsPurchase of Plant AssetsFor InterestFor Income TaxesCash PaymentsCash Receipts from CustomersFor Operating ExpensesSale of Plant AssetsSale of Common StockPayment of Cash Dividends

Cash Receipts from CustomersPurchase of Plant AssetsSale of Common StockPurchase of InvestmentsFor Income TaxesPayment of Cash DividendsRedemption of BondsCash PaymentsTo SuppliersFor Operating ExpensesFor InterestSale of Plant Assets

Cash PaymentsCash Receipts from CustomersRedemption of BondsPurchase of InvestmentsFor Income TaxesTo SuppliersFor Operating ExpensesFor InterestPayment of Cash DividendsPurchase of Plant AssetsSale of Common StockSale of Plant Assets

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

(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.

Cash is not independently countedThe accountant should not handle cashInability to establish responsibility for cash on a specific clerkCashiers are not bonded and background checks are not conductedCash is not adequately protected from theft

Human resource controlsSegregation of dutiesIndependent internal verificationPhysical controlsEstablishment of responsibilityDocumentation procedures

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

Cash is not adequately protected from theftInability to establish responsibility for cash on a specific clerkCash is not independently countedThe accountant should not handle cashCashiers are not bonded and background checks are not conducted

Segregation of dutiesHuman resource controlsEstablishment of responsibilityPhysical controlsIndependent internal verificationDocumentation procedures

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.

Inability to establish responsibility for cash on a specific clerkCash is not independently countedThe accountant should not handle cashCashiers are not bonded and background checks are not conductedCash is not adequately protected from theft

Segregation of dutiesEstablishment of responsibilityPhysical controlsIndependent internal verificationDocumentation proceduresHuman resource controls

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

Cash is not independently countedThe accountant should not handle cashCash is not adequately protected from theftCashiers are not bonded and background checks are not conductedInability to establish responsibility for cash on a specific clerk

Documentation proceduresHuman resource controlsPhysical controlsIndependent internal verificationSegregation of dutiesEstablishment of responsibility

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

The accountant should not handle cashInability to establish responsibility for cash on a specific clerkCashiers are not bonded and background checks are not conductedCash is not adequately protected from theftCash is not independently counted

Physical controlsHuman resource controlsEstablishment of responsibilityDocumentation proceduresIndependent internal verificationSegregation of duties

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

71,590

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 subsidiares

—

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

Trademarks

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

Liability for uncertain tax positions

8,345

9,835

Deferred compensation and other liabilities

48,092

46,157

/td>

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

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

Files: acct_5.docx