Lecture_Outline-Chapter_Nine - LECTURE OUTLINE MANAGEMENT...

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LECTURE OUTLINE 1 MANAGEMENT 100 CHAPTER 9 FINANCIAL ACCOUNTING Inventory and the Cost of Goods Sold Review 1. 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? 2. 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? 3. 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 Balance Sheet (Values in this worksheet are in millions, except where noted.) ASSETS 05/28/00 05/30/99 Cash and cash equivalents $25.6 $3.9 Receivables, less allowance for doubtful accounts of $5.8 in 2000 and $4.7 in 1999 500.6 490.6 Inventories 510.5 426.7 Prepaid expenses and other current assets 87.7 83.7 Deferred income taxes 65.9 97.6 Total Current Assets 1,190.3 1,102.5 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $641.5 $647.4 Current portion of long-term debt 413.5 90.5 Notes payable 1,085.8 524.4 Accrued taxes 104.9 135.0 Accrued payroll 142.4 138.6 Other current liabilities 141.0 164.4 Total Current Liabilities 2,529.1 1,700.3 (a) How would this write-off affect its Current Ratio? (b) 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.) (c) Comment on the balance of the allowance for doubtful accounts at both yearends.
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MANAGEMENT 100 DANNY S. LITT 2 LEARNING OBJECTIVES: (1) Understand exactly what costs are included in inventory. (2)
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Lecture_Outline-Chapter_Nine - LECTURE OUTLINE MANAGEMENT...

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