Lecture13_spring2_2009

Lecture13_spring2_2009 - Lecture 13 Inventory Accounting...

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Lecture 13 Inventory Accounting for Harley Davidson and John Deere                                                 
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Goals of Today’s Class Recap of Inventory Acctg. (Lecture 12) Case Study Harley Davidson John Deere
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Inventory T-Account Inventory + Purchases Beg. Inventory - Cost of Goods Sold / Used End. Inventory Cost of goods available for sale While, in general, the quantity of goods sold and the quantity of goods held in the ending inventory are known, the cost of goods sold and the cost of the ending inventory must be determined
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Allocating Cost of Goods Available for Sale
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Alternative Cost Flow Assumptions
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Case Study Inventory Accounting for Harley Davidson and John Deere                                                 
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Using information in financial statements, we will answer the following questions: 1. How much more or less would Harley Davidson’s 2005 pre-tax income have been had it always used FIFO for all of its inventory? 2. As of the end of fiscal 2005, what is the amount of pre- tax income HD avoided reporting by using LIFO rather than FIFO for some of its inventory? 3. What was the estimated loss recognized by HD on the income statement due to obsolescence in fiscal 2005? 4. How much inventory was written off by HD due to obsolescence in fiscal 2005? 5. How would you calculate a useful inventory turnover ratio for HD?
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HARLEY-DAVIDSON, INC. CONSOLIDATED STATEMENTS OF INCOME Years ended December 31, 2005, 2004 and 2003 (In thousands, except per share amounts) 2005 2004 2003 Net revenue $ 5,342,214 $ 5,015,190 $ 4,624,274 Cost of goods sold 3,301,715 3,115,655 2,958,708 Gross profit 2,040,499 1,899,535 1,665,566 Financial services income 331,618 305,262 279,459 Financial services expense 139,998 116,662 111,586 Operating income from financial services 191,620 188,600 167,873 Selling, administrative and engineering expense 762,108 726,644 684,175 Income from operations 1,470,011 1,361,491 1,149,264 Investment income, net 22,797 23,101 23,088 Other, net (5,049 ) (5,106 ) (6,317 ) Income before provision for income taxes 1,487,759 1,379,486 1,166,035 Provision for income taxes 528,155 489,720 405,107 Net income $ 959,604 $ 889,766 $ 760,928 Basic earnings per common share $ 3.42 $ 3.02 $ 2.52 Diluted earnings per common share $ 3.41 $ 3.00 $ 2.50 Cash dividends per common share $ .625 $ .405 $ .195
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HARLEY-DAVIDSON, INC. CONSOLIDATED BALANCE SHEETS December 31, 2005 and 2004 (In thousands, except share amounts) 2005 2004 ASSETS Current assets: Cash and cash equivalents $ 140,975 $ 275,159 Marketable securities 905,197 1,336,909 Accounts receivable, net 122,087 121,333 Finance receivables held for sale 299,373 456,516 Finance receivables held for investment, net 1,342,393 1,167,522 Inventories 221,418 226,893 Deferred income taxes 61,285 60,517 Prepaid expenses and other current assets 52,509 38,337 Total current assets 3,145,237 3,683,186 Finance receivables held for investment, net 600,831 488,262 Property, plant and equipment, net 1,011,612 1,024,665 Prepaid pension costs 368,165 133,322 Goodwill 56,563 59,456 Other assets 72,801 94,402 $ 5,255,209 $ 5,483,293
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LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 270,614 $ 244,202 Accrued expenses and other liabilities 397,525 433,053 Current portion of finance debt 204,973 495,441 Total current liabilities 873,112 1,172,696 Finance debt 1,000,000 800,000 Deferred income taxes 155,236 51,432 Postretirement healthcare benefits 60,975 149,848 Other long-term liabilities 82,281 90,846 Commitments and contingencies (Note 6) Shareholders’ equity:
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This note was uploaded on 02/02/2012 for the course ACCT 101 taught by Professor Armstrong during the Spring '09 term at UPenn.

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Lecture13_spring2_2009 - Lecture 13 Inventory Accounting...

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