Inventory and the Cost of Goods Sold
No-go.com reported a restructuring expense of $200 million for the year ending June 30, 2001. About
60% of this was related to the impairment of two plants in Omaha and the remainder arose due to
severance payments required because of corporate layoffs. Payment to “retired” employees was to
being in the first quarter of the following fiscal year. Show the journal entry to account for the
restructuring. How would this expense affect: the current ratio, debt/equity, return on equity, cash
flow from operations?
General Mills reported Dividends Payable of $100 and $150 and Retained Earnings of $2,114 and
$1,827 on May 28, 2000 and May 30, 1999, respectively ($ in millions). On its Income Statement, net
earnings for the year ending May 28, 2000 were $614. Did General Mills declare dividends? If so,
how much? Did General Motors pay dividends? If so, how much? Where are dividends paid reported
on the Cash Flow Statement?
In June 2000, General Mills was considering writing off an Accounts Receivable of $2 million.
At that time, the current accounts on its Balance Sheet appeared as follows:
GENERAL MILLS INC
(Values in this worksheet are in millions, except where noted.)
Cash and cash equivalents
Receivables, less allowance for doubtful accounts of $5.8 in 2000 and $4.7 in 1999
Prepaid expenses and other current assets
Deferred income taxes
Total Current Assets
LIABILITIES AND EQUITY
Current portion of long-term debt
Other current liabilities
Total Current Liabilities
How would this write-off affect its Current Ratio?
If Sales for the year ending 5/28/00 and 5/30/99, respectively were $6,700 and $6,246 (in $ millions),
estimate the Receivables Turnover ratio (in days). Were there major changes? (Note: Net receivables
as of 6/30/98 were $395.1; the allowance for doubtful accounts was $4.2.)
Comment on the balance of the allowance for doubtful accounts at both yearends.