Financial Reporting and Analysis

BYP3-1http://edugen.wileyplus.com/edugen/courses/crs6367/kimmel9780470534786/c03/image_n/tootsieRoll.png

FINANCIAL REPORTING PROBLEM:Tootsie Roll Industries Inc.

The financial statements ofTootsie Rollin AppendixAat the back of this book contain the following selected accounts, all in thousands of dollars.

Common Stock$ 24,862
Accounts Payable9,140
Accounts Receivable37,512
Selling, Marketing, and Administrative Expenses103,755
Prepaid Expenses8,562
Net Property, Plant, and Equipment220,721
Net Product Sales495,592

Instructions

(a)What is the increase and decrease side for each account? What is the normal balance for each account?
(b)Identify the probable other account in the transaction and the effect on that account when:

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1.Accounts Receivable is decreased.
2.Accounts Payable is decreased.
3.Prepaid Expenses is increased.
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(c)Identify the other account(s) that ordinarily would be involved when:

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http://edugen.wileyplus.com/edugen/courses/crs6367/common/art/pixel.gif
1.Interest Expense is increased.
2.Property, Plant, and Equipment is increased.
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BYP3-2http://edugen.wileyplus.com/edugen/courses/crs6367/kimmel9780470534786/c03/image_n/tootsieRoll.png

COMPARATIVE ANALYSIS PROBLEM:Tootsie Roll vs. Hershey

The financial statements ofThe Hershey Companyappear in AppendixB, following the financial statements forTootsie Rollin AppendixA.

Instructions

(a)Based on the information contained in these financial statements, determine the normal balance for:

Tootsie Roll IndustriesThe Hershey Company
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1.Accounts Receivable
2.Net Property, Plant, and Equipment
3.Accounts Payable
4.Retained Earnings
5.Net Product Sales
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1.Inventories
2.Provision for Income Taxes
3.Accrued Liabilities
4.Common Stock
5.Interest Expense
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(b)Identify the other account ordinarily involved when:

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1.Accounts Receivable is increased.
2.Notes Payable is decreased.
3.Machinery is increased.
4.Interest Revenue is increased.
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Financial Reporting and Analysis

BYP4-1http://edugen.wileyplus.com/edugen/courses/crs6367/kimmel9780470534786/c04/image_n/tootsieRoll.png

FINANCIAL REPORTING PROBLEM:Tootsie Roll Industries, Inc.

The financial statements ofTootsie Rollare presented in AppendixA

Instructions

(a)Using the consolidated income statement and balance sheet, identify items that may result in adjusting entries for deferrals.
(b)Using the consolidated income statement, identify two items that may result in adjusting entries for accruals.
(c)What was the amount of depreciation expense for 2009 and 2008? (You will need to examine the notes to the financial statements or the statement of cash flows.) Where was accumulated depreciation reported?
(d)What was the cash paid for income taxes during 2009, reported at the bottom of the consolidated statement of cash flows? What was income tax expense (provision for income taxes) for 2009?
BYP4-2http://edugen.wileyplus.com/edugen/courses/crs6367/kimmel9780470534786/c04/image_n/tootsieRoll.png

COMPARATIVE ANALYSIS PROBLEM:Tootsie Roll vs. Hershey

The financial statements ofThe Hershey Companyare presented in AppendixB, following the financial statements forTootsie Rollin AppendixA.

Instructions

(a)Identify two accounts on Hershey’s balance sheet that provide evidence that Hershey uses accrual accounting. In each case, identify the income statement account that would be affected by the adjustment process.
(b)Identify two accounts on Tootsie Roll’s balance sheet that provide evidence that Tootsie Roll uses accrual accounting (different from the two you listed for Hershey). In each case, identify the income statement account that would be affected by the adjustment process.

Appendix A

Financial Statements and Accompanying Notes

The standard set of financial statements consists of: (1) a comparative income statement for three years, (2) a comparative balance sheet for two years, (3) a comparative statement of cash flows for three years, (4) a statement of retained earnings (or stockholders’ equity) for three years, and (5) a set of accompanying notes that are considered an integral part of the financial statements. The auditor’s report, unless stated otherwise, covers the financial statements and the accompanying notes. The financial statements and accompanying notes plus some supplementary data and analyses forTootsie Roll Industriesfollow.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Assets
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES(in thousands)
December 31,
20092008
CURRENT ASSETS:
Cash and cash equivalents$?90,990$?68,908
Investments8,66317,963
Accounts receivable trade, less allowances of $2,356 and $1,92337,51231,213
Other receivables8,3972,983
Inventories:
Finished goods and work-in-process35,57034,862
Raw materials and supplies20,81720,722
Prepaid expenses8,56211,328
Deferred income taxes1,367609
Total current assets211,878188,588
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land21,55919,307
Buildings102,37489,077
Machinery and equipment296,787279,100
Construction in progress6,87720,701
427,597408,185
Less—Accumulated depreciation206,876190,557
Net property, plant and equipment220,721217,628
OTHER ASSETS:
Goodwill73,23773,237
Trademarks175,024189,024
Investments58,13649,809
Split dollar officer life insurance74,64274,808
Prepaid expenses8,06810,333
Investment in joint venture4,9619,274
Deferred income taxes11,580824
Total other assets405,648407,309
Total assets$838,247$813,525
(The accompanying notes are an integral part of these statements.)
Liabilities and Shareholders’ Equity
(in thousands except per share data)
December 31,
20092008
CURRENT LIABILITIES:
Accounts payable$??9,140$?13,885
Dividends payable4,4584,401
Accrued liabilities42,46840,335
Total current liabilities56,06658,621
NONCURRENT LIABILITES:
Deferred income taxes44,58245,410
Postretirement health care and life insurance benefits16,67415,468
Industrial development bonds7,5007,500
Liability for uncertain tax positions21,10119,412
Deferred compensation and other liabilities39,83932,344
Total noncurrent liabilities129,696120,134
SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value—120,000 shares authorized—35,802 and 35,658, respectively, issued24,86224,762
Class B common stock, $.69-4/9 par value—40,000 shares authorized—19,919 and 19,357, respectively, issued13,83313,442
Capital in excess of par value482,250470,927
Retained earnings, per accompanying statement145,928142,872
Accumulated other comprehensive loss(12,396)(15,241)
Treasury stock (at cost)—67 shares and 65 shares, respectively(1,992)(1,992)
Total shareholders’ equity652,485634,770
Total liabilities and shareholders’ equity$838,247$813,525

CONSOLIDATED STATEMENTS OFEARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS

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TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES(in thousands except per share data)
For the year ended December 31,
200920082007
Net product sales$495,592$492,051$492,742
Rental and royalty revenue3,7393,9654,975
Total revenue499,331496,016497,717
Product cost of goods sold318,645333,314327,695
Rental and royalty cost8529211,349
Total costs319,497334,235329,044
Product gross margin176,947158,737165,047
Rental and royalty gross margin2,8873,0443,626
Total gross margin179,834161,781168,673
Selling, marketing and administrative expenses103,75595,25497,821
Impairment charges14,000
Earnings from operations62,07966,52770,852
Other income (expense), net2,100(10,618)6,315
Earnings before income taxes64,17955,90977,167
Provision for income taxes10,70417,13225,542
Financial Reporting and Analysis

BYP3-1http://edugen.wileyplus.com/edugen/courses/crs6367/kimmel9780470534786/c03/image_n/tootsieRoll.png

FINANCIAL REPORTING PROBLEM:Tootsie Roll Industries Inc.

The financial statements ofTootsie Rollin AppendixAat the back of this book contain the following selected accounts, all in thousands of dollars.

Common Stock$ 24,862
Accounts Payable9,140
Accounts Receivable37,512
Selling, Marketing, and Administrative Expenses103,755
Prepaid Expenses8,562
Net Property, Plant, and Equipment220,721
Net Product Sales495,592

Instructions

(a)What is the increase and decrease side for each account? What is the normal balance for each account?
(b)Identify the probable other account in the transaction and the effect on that account when:

http://edugen.wileyplus.com/edugen/courses/crs6367/common/art/pixel.gif
http://edugen.wileyplus.com/edugen/courses/crs6367/common/art/pixel.gif
1.Accounts Receivable is decreased.
2.Accounts Payable is decreased.
3.Prepaid Expenses is increased.
http://edugen.wileyplus.com/edugen/courses/crs6367/common/art/pixel.gif
(c)Identify the other account(s) that ordinarily would be involved when:

http://edugen.wileyplus.com/edugen/courses/crs6367/common/art/pixel.gif
http://edugen.wileyplus.com/edugen/courses/crs6367/common/art/pixel.gif
1.Interest Expense is increased.
2.Property, Plant, and Equipment is increased.
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BYP3-2http://edugen.wileyplus.com/edugen/courses/crs6367/kimmel9780470534786/c03/image_n/tootsieRoll.png

COMPARATIVE ANALYSIS PROBLEM:Tootsie Roll vs. Hershey

The financial statements ofThe Hershey Companyappear in AppendixB, following the financial statements forTootsie Rollin AppendixA.

Instructions

(a)Based on the information contained in these financial statements, determine the normal balance for:

Tootsie Roll IndustriesThe Hershey Company
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1.Accounts Receivable
2.Net Property, Plant, and Equipment
3.Accounts Payable
4.Retained Earnings
5.Net Product Sales
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1.Inventories
2.Provision for Income Taxes
3.Accrued Liabilities
4.Common Stock
5.Interest Expense
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(b)Identify the other account ordinarily involved when:

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http://edugen.wileyplus.com/edugen/courses/crs6367/common/art/pixel.gif
1.Accounts Receivable is increased.
2.Notes Payable is decreased.
3.Machinery is increased.
4.Interest Revenue is increased.
http://edugen.wileyplus.com/edugen/courses/crs6367/common/art/pixel.gif

Financial Reporting and Analysis

BYP4-1http://edugen.wileyplus.com/edugen/courses/crs6367/kimmel9780470534786/c04/image_n/tootsieRoll.png

FINANCIAL REPORTING PROBLEM:Tootsie Roll Industries, Inc.

The financial statements ofTootsie Rollare presented in AppendixA

Instructions

(a)Using the consolidated income statement and balance sheet, identify items that may result in adjusting entries for deferrals.
(b)Using the consolidated income statement, identify two items that may result in adjusting entries for accruals.
(c)What was the amount of depreciation expense for 2009 and 2008? (You will need to examine the notes to the financial statements or the statement of cash flows.) Where was accumulated depreciation reported?
(d)What was the cash paid for income taxes during 2009, reported at the bottom of the consolidated statement of cash flows? What was income tax expense (provision for income taxes) for 2009?
BYP4-2http://edugen.wileyplus.com/edugen/courses/crs6367/kimmel9780470534786/c04/image_n/tootsieRoll.png

COMPARATIVE ANALYSIS PROBLEM:Tootsie Roll vs. Hershey

The financial statements ofThe Hershey Companyare presented in AppendixB, following the financial statements forTootsie Rollin AppendixA.

Instructions

(a)Identify two accounts on Hershey’s balance sheet that provide evidence that Hershey uses accrual accounting. In each case, identify the income statement account that would be affected by the adjustment process.
(b)Identify two accounts on Tootsie Roll’s balance sheet that provide evidence that Tootsie Roll uses accrual accounting (different from the two you listed for Hershey). In each case, identify the income statement account that would be affected by the adjustment process.

Appendix A

Financial Statements and Accompanying Notes

The standard set of financial statements consists of: (1) a comparative income statement for three years, (2) a comparative balance sheet for two years, (3) a comparative statement of cash flows for three years, (4) a statement of retained earnings (or stockholders’ equity) for three years, and (5) a set of accompanying notes that are considered an integral part of the financial statements. The auditor’s report, unless stated otherwise, covers the financial statements and the accompanying notes. The financial statements and accompanying notes plus some supplementary data and analyses forTootsie Roll Industriesfollow.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Assets
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES(in thousands)
December 31,
20092008
CURRENT ASSETS:
Cash and cash equivalents$?90,990$?68,908
Investments8,66317,963
Accounts receivable trade, less allowances of $2,356 and $1,92337,51231,213
Other receivables8,3972,983
Inventories:
Finished goods and work-in-process35,57034,862
Raw materials and supplies20,81720,722
Prepaid expenses8,56211,328
Deferred income taxes1,367609
Total current assets211,878188,588
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land21,55919,307
Buildings102,37489,077
Machinery and equipment296,787279,100
Construction in progress6,87720,701
427,597408,185
Less—Accumulated depreciation206,876190,557
Net property, plant and equipment220,721217,628
OTHER ASSETS:
Goodwill73,23773,237
Trademarks175,024189,024
Investments58,13649,809
Split dollar officer life insurance74,64274,808
Prepaid expenses8,06810,333
Investment in joint venture4,9619,274
Deferred income taxes11,580824
Total other assets405,648407,309
Total assets$838,247$813,525
(The accompanying notes are an integral part of these statements.)
Liabilities and Shareholders’ Equity
(in thousands except per share data)
December 31,
20092008
CURRENT LIABILITIES:
Accounts payable$??9,140$?13,885
Dividends payable4,4584,401
Accrued liabilities42,46840,335
Total current liabilities56,06658,621
NONCURRENT LIABILITES:
Deferred income taxes44,58245,410
Postretirement health care and life insurance benefits16,67415,468
Industrial development bonds7,5007,500
Liability for uncertain tax positions21,10119,412
Deferred compensation and other liabilities39,83932,344
Total noncurrent liabilities129,696120,134
SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value—120,000 shares authorized—35,802 and 35,658, respectively, issued24,86224,762
Class B common stock, $.69-4/9 par value—40,000 shares authorized—19,919 and 19,357, respectively, issued13,83313,442
Capital in excess of par value482,250470,927
Retained earnings, per accompanying statement145,928142,872
Accumulated other comprehensive loss(12,396)(15,241)
Treasury stock (at cost)—67 shares and 65 shares, respectively(1,992)(1,992)
Total shareholders’ equity652,485634,770
Total liabilities and shareholders’ equity$838,247$813,525

CONSOLIDATED STATEMENTS OFEARNINGS, COMPREHENSIVE EARNINGS AND RETAINED EARNINGS

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Your email address will not be published. Required fields are marked *

 
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES(in thousands except per share data)
For the year ended December 31,
200920082007
Net product sales$495,592$492,051$492,742
Rental and royalty revenue3,7393,9654,975
Total revenue499,331496,016497,717
Product cost of goods sold318,645333,314327,695
Rental and royalty cost8529211,349
Total costs319,497334,235329,044
Product gross margin176,947158,737165,047
Rental and royalty gross margin2,8873,0443,626
Total gross margin179,834161,781168,673
Selling, marketing and administrative expenses103,75595,25497,821
Impairment charges14,000
Earnings from operations62,07966,52770,852
Other income (expense), net2,100(10,618)6,315
Earnings before income taxes64,17955,90977,167
Provision for income taxes10,70417,13225,542