ACC 290 Week 5 Learning Team Assignment Financial Reporting Problem, Part 2
ACC 290 Week 5 Learning Team Assignment Financial Reporting Problem, Part 2
Popular in Course
verified elite notetaker
Popular in Department
This 0 page Study Guide was uploaded by tophomework Notetaker on Friday November 13, 2015. The Study Guide belongs to a course at a university taught by a professor in Fall. Since its upload, it has received 17 views.
Reviews for ACC 290 Week 5 Learning Team Assignment Financial Reporting Problem, Part 2
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 11/13/15
Running head FINANCIAL REPORTING PROBLEM Financial Reporting Problem Part II ACC290 University of Phoenix FINANCIAL REPORTING PROBLEM 2 Financial Reporting Problem Part II PepsiCo is a highly known beverage distributor The cola started in the late 1800s in a drugstore and its original name was Brad s Drink In 1898 cola introduced Brad s Drink to the market Then later change the name to Pepsi It is a large company that has numerous assets and liabilities Many investors and creditors would be willing to work with this company because they run a good business Currents assets are very significant to companies like PepsiCo In the balance sheet current assets are assets that a company expects to convert to cash or use up within one year or its operating cycle whichever is longer For most businesses the cut off for classification as current assets is one year from the balance sheet date Kimmel Weygandt amp Kieso 2011 p 49 The company can use these assets to support its routine operations For example the company can use the assets to pay their current expenses The common type of current assets consist of cash marketable securities inventory accounts receivable prepaid expenses and additional liquid assets that the company can quickly convert into cash However according to Kimmel Weygandt and Kieso 2011 companies normally arrange their current assets in the order in which they anticipate to convert them into cash Therefore the proper order for a company to have its assets listed under the current assets is as follows cash 2 shortterm investments such as shortterm US government securities 3 receivables notes receivable accounts receivable and interest receivable 4 inventories and 5 prepaid expenses insurance and supplies Kimmel Weygandt amp Kieso 2011 p 50 FINANCIAL REPORTING PROBLEM 3 PepsiCo register its assets in the proper order under their current assets First on the list are its cash and cash equivalents which is anything that can immediately turn into cash Some examples of cash and cash equivalents are money paper checks money orders gift certificates and gift cards The second type of assets is the shortterm investments These investments accounts hold bonds and stocks that the company can liquidate reasonably fast The third asset listed is the net receivables The net receivable is full amount of money PepsiCo s customers owed minus the amount that the company does not expect to receive from its clients The next on the list is the company s inventory Inventory is second to last on the list mainly because the company has to sell its supplies and certain products may take time to sell Then other current assets locate last on the list This account contains non cash value assets such as account receivable and prepaid expenses In general PepsiCo classify its assets in the following order First it has its current assets listed with the total current assets followed by longterm investments property plant and equipment goodwill intangible assets accumulated amortization other assets deferred long term asset charges and total assets Yahoo Finance 2011 A company s cash equivalents are its shortterm investments These investments are highly liquid and can easily be converted to cash Stock Analysis on Net 2011 The shortterm investments are so near maturity usually three months or less they have a minimal risk of changes in value because of changes in interest rates Stock Analysis on Net 2011 Compensating balance arrangements that do not legally restrict withdrawal use of cash amounts also qualify as cash equivalents Stock Analysis on Net 2011 PepsiCo reported 5943000 in FINANCIAL REPORTING PROBLEM 4 cash and cash equivalents in its most recent reporting period Yahoo Finance 2011 Its short term investments were in the amount of 426000 in 2010 The total current liabilities reported at the end of PepsiCo s most recent annual reporting period was 15892000 Yahoo Finance 2011 This included the accounts payable and shortcurrent longterm debt Accounts payable accounted for 10994000 This is the amount the company owes to suppliers that they have not yet paid They bought supplies on credit and received an invoice to be filed The invoice will be paid at a later date and removed from the file Shortcurrent longterm debt made up the other 4898000 This is the portion of long term debt that must be paid in the next 12 months Say PepsiCo borrowed from their financial institution The loan is set to be paid back in 10 years This is year number four on paying back the loan The company record portion of the loan paid this year under the shortcurrent long term debt Current liabilities are bills the company owes to creditors and suppliers within a short time usually 12 months For the previous accounting period ending as December 26 2009 PepsiCo had a total of 8756000 in total current liabilities Yahoo Finance 2011 The total current liabilities encompass accounts payable payables accrued accrued expenses and notes payableshortterm debt The biggest current liability is accounts payable which is the money owed to venders for goods or services provided to the company Of the total current liabilities from 2009 the account payable was the most with 8292000 Notes payableshortterm debt has total of 464000 FINANCIAL REPORTING PROBLEM 5 The information that has been gathered is useful to employees investors and any potential creditors The company can use this information in various ways depending upon the individual or group reviewing the information In the case of labor unions employees can use this information as a collective bargaining agreement CBA with management in discussing their compensation promotions and ranking within the company Employees also review financial statements to stay aware of the stability and profitability of their employer With this information employees can assess the ability of the company to provide retirement benefits and employment opportunities Prospective investors review the information gathered from PepsiCo financial statements to assess the viability of investing in PepsiCo Creditors such as banks and other lending companies will use the information from PepsiCo financial statements to determine whether or not to lend PepsiCo fresh working capital or extend debt securities such as longterm bank loans and debentures Vendors that extend credit to PepsiCo will use the financial statement to determine the creditworthiness of PepsiCo In conclusion this paper is a summation of the financial standing for PepsiCo Incorporated It states details of why the assets are in proper order how PepsiCo classify its assets the definition of cash equivalents the current liabilities for the recent annual reporting period and current liabilities for the previous annual reporting period It also provides how and why potential creditors investors and employees may use the information that has been gathered to make important financial decisions FINANCIAL REPORTING PROBLEM PepsiCo Inc PEP Top of Form Bott om of Balance Sheet For m View Annual Data Quarterly Data All numbers in thousands Period Ending Dec 25 2010 Dec 26 2009 Dec 27 2008 Assets Current Assets Cash And Cash Equivalents 5943000 3943000 2064000 Short Term Investments 426000 192000 213000 Net Receivables 6323000 4624000 4683000 Inventory 3372000 2618000 2522000 Other Current Assets 1505000 1194000 1324000 Total Current Assets 17569000 12571000 10806000 Long Term Investments 1368000 4484000 3998000 FINANCIAL REPORTING PROBLEM Property Plant and Equipment 19058000 12671000 11663000 Goodwill 14661000 6534000 5124000 Intangible Assets 13808000 2623000 1860000 Accumulated Amortization Other Assets 1689000 965000 2324000 Deferred Long Term Asset Charges 219000 Total Assets 68153000 39848000 35994000 Liabilities Current Liabilities Accounts Payable 10994000 8292000 6494000 ShortCurrent Long Term Debt 4898000 464000 369000 Other Current Liabilities 1924000 Total Current Liabilities 15892000 8756000 8787000 Long Term Debt 19999000 7400000 7858000 Other Liabilities 6729000 5591000 7017000 Deferred Long Term Liability Charges 4057000 659000 226000 Minority Interest 312000 638000 Negative Goodwill FINANCIAL REPORTING PROBLEM Total Liabilities 46989000 23044000 23888000 Stockholders Equity Misc Stocks Options Warrants 109000 104000 Redeemable Preferred Stock 97000 Preferred Stock Common Stock 31000 30000 30000 Retained Earnings 37090000 33805000 30638000 Treasury Stock 16745000 13383000 14122000 Capital Surplus 4527000 250000 351000 Other Stockholder Equity 3630000 3794000 4694000 Total Stockholder Equity 21273000 16908000 12203000 Net Tangible Assets 7196000 7751000 5219000 Currency in USD Yahoo Finance 2011 FINANCIAL REPORTING PROBLEM PepsiCo Inc PEP Top of Form Income Statement View Annual Data Quarterly Data All numbers in thousands period Ending Dec 25 2010 Dec 26 2009 Dec 27 2008 Total Revenue 57838000 43232000 43251000 Cost of Revenue 26575000 20099000 20351000 Gross Profit 31263000 23133000 22900000 Research Development Selling General and Administrative 22814000 15026000 15901000 Non Recurring Others 1 17000 63000 64000 Total Operating Expenses FINANCIAL REPORTING PROBLEM 10 Operating Income or Loss 8332000 8044000 6935000 1111 we 11 n1 1111111111153 Zz gkfkffi 11 Total Other IncomeExpenses Net 68000 67000 41000 Earnings Before Interest And Taxes 9135000 8476000 7350000 Interest Expense 903000 397000 329000 Income Before Tax 8232000 8079000 7021000 Income Tax Expense 1894000 2100000 1879000 Minority Interest 18000 33000 Net Income From Continuing Ops 7055000 6311000 5142000 I I n 11111 139I i3 El en Discontinued Operations Extraordinary Items Effect Of Accounting Changes Other Items FINANCIAL REPORTING PROBLEM Net Income 6320000 5946000 5142000 Preferred Stock And Other Adjustments Net Income Applicable To Common Shares 6320000 5946000 5142000 Currency in USD Yahoo Finance 2011 11 FINANCIAL REPORTING PROBLEM 12 References Kimmel P D Weygandt J J amp Kieso D E 2011 Financial accounting Tools for business decision making 6th ed Hoboken NJ John Wiley amp Sons Stock Analysis on Net 2011 Cash and Cash Equivalent At Carrying Value Retrieved from httpstockanalysisonnet Yahoo Finance 2011 June PepsiCo Inc PEP Retrieved from httpfinanceyahoocomqbssPEPampannual
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'