Interpreting Financial Statements: Restructuring Bergen Brunswig Corporation reported the following information (dollars in thousands) in its 1993 consolidated earnings statement: Operating earnings from continuing operations $70,983 Net interest expense 22,723 Earnings from continuing operations before taxes 48,260 Taxes on income from continuing operations 19,653 Earnings from continuing operations 28,607 Extraordinary loss from early extinguishment of debt, net of income tax benefit (2,570) Net earnings $26,037 […]

Segment Reporting TRW, Inc., is a global company that specializes in producing automotive, spacecraft, and information system products. The following (partial) segment data was reported (dollars in millions): December 31 1994 1993 Sales: Automotive $5,679 $4,538 Space and defense 2,812 2,792 Information systems 596 618 Operating profit: Automotive $476 $309 Space and defense 175 199 Information systems 96 74 Identifiable assets: Automotive $3,481 $3,004 Space […]

Effects of Retroactive Adjustment: Percentage-of-Completion Method Ace Construction Company accounted for all its long-term contracts on a deferred basis; that is, all revenue and expenses were deferred until the completion of the contract when all the costs were known with certainty. Although this is a on servative approach, Ace has been having difficulty with its auditors and with the IRS over this approach. It now […]

Interim Reports Falcon Amusements, Inc. chose September 30 as its year-end. Reported below are its quarterly income statements for fiscal 2000 and its annual income statement.       Quarterly       10/1/99 1/1/00 4/1/00 7/1/00 Annual at   12/31/99 3/31/00 6/30/00 9/30/00 9/30/00 Net sales $577,441 $571,930 $698,432 $818,034 $2,665,837 Cost of goods 118,563 126,471 134,587 174,259 553,880 Gross profit 458,878 445,459 563,845 […]

Possible Violation of Debt/Asset Covenant Assume you have just conducted a preliminary analysis of your firm’s 1999 financial statements. The firm has not prospered in recent years, and you are particularly concerned about violating a provision of a loan agreement you have with a local bank. Your firm has a $200,000, nine percent bank loan due in 2001. One provision of the loan agreement is […]

Interim Reporting International Dairy Queen’s annual income statement for the year ended November 30, 1994, and its four quarterly income statements are presented below.   ending           11/30/94 11/30/94 2/24/95 5/26/95 8/25/95 Net sales $340,833 $76,070 $67,530 $106,150 $115,361 Cost of goods           sold 249,985 55,140 47,556 79,220 83,010 Gross profit 90,848 20,930 19,974 26,930 32,351 Selling, […]

Avanti Manufacturing Company has two production departments: Molding and Assembly. March 1 inventories are Raw Materials $3,600, Work in Process—Molding $2,200, Work in Process—Assembly $8,800 and Finished Goods $26,000. During March, the following transactions occurred: 1. Purchased $28,400 of raw materials on account. 2. Incurred $48,000 of factory labor. (Credit Wages Payable.) 3. Incurred $62,000 of manufacturing overhead; $39,000 was paid and the remainder is […]

John Hasty opened his bakery on March 1, 1999. The following transactions took place in early March: 1. Deposited $10,000 into a checking account in the name of the Hasty Bakery. 2. Leased a small kitchen for one year at $500 per month. One month’s rent was paid at this time. 3. Purchased kitchen equipment for $3,000 cash. 4. Purchased baking ingredients for $6,000 on […]

Sismondi Company has a process cost accounting system. During May, the Assembly and Finishing Departments had the following data concerning physical units: Assembly: Work in process, May 1 3,000 Started into process during the month 65,000 Work in process, May 31 7,000 Finishing: Work in process, May 1 6,000 Transferred in from Assembly Department during the month ? Work in process, May 31 4,000 Instructions […]

Contained the following information for Seaboard Corporation (dollars in thousands): 1997 1996 1995 Earnings before cumulative effect of accounting change $30,574 $2,840 $20,202 Cumulative effect of changing the accounting for inventories, net of tax expense of $1,922 — 3,006 — Net earnings $30,574 $5,846 $20,202 The following figures are on a per share basis: 1997 1996 1995 Earnings before cumulative effect of accounting change $ […]