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BYP 3 & 4 Solutions

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Question;Financial;Reporting and Analysis;BYP3-1;FINANCIAL REPORTING;PROBLEM:Tootsie Roll;Industries Inc.;The financial statements ofTootsie Rollin AppendixAat the back of this;book contain the following selected accounts, all in thousands of;dollars.;Common Stock;$;24,862;Accounts Payable;9,140;Accounts Receivable;37,512;Selling, Marketing, and Administrative;Expenses;103,755;Prepaid Expenses;8,562;Net Property, Plant, and Equipment;220,721;Net Product Sales;495,592;Instructions;(a);What is the increase and decrease side for each;account? What is the normal balance for each account?;(b);Identify the probable other account in the transaction;and the effect on that account when;1.;Accounts Receivable is decreased.;2.;Accounts Payable is decreased.;3.;Prepaid Expenses is increased.;(c);Identify the other account(s) that ordinarily would be;involved when;1.;Interest Expense is increased.;2.;Property, Plant, and Equipment is;increased.;BYP3-2;COMPARATIVE ANALYSIS;PROBLEM:Tootsie Roll;vs. Hershey;The financial statements ofThe Hershey Companyappear in AppendixB;following the financial statements forTootsie Rollin AppendixA.;Instructions;(a);Based on the information contained in these financial;statements, determine the normal balance for;Tootsie;Roll Industries;The;Hershey Company;1.;Accounts Receivable;2.;Net Property, Plant, and Equipment;3.;Accounts Payable;4.;Retained Earnings;5.;Net Product Sales;1.;Inventories;2.;Provision for Income Taxes;3.;Accrued Liabilities;4.;Common Stock;5.;Interest Expense;(b);Identify the other account ordinarily involved when;1.;Accounts Receivable is increased.;2.;Notes Payable is decreased.;3.;Machinery is increased.;4.;Interest Revenue is increased.;Financial;Reporting and Analysis;BYP4-1;FINANCIAL REPORTING PROBLEM:Tootsie Roll Industries, Inc.;The;financial statements ofTootsie Rollare presented in AppendixA;Instructions;(a);Using the consolidated income statement and balance sheet;identify items that may result in adjusting entries for deferrals.;(b);Using the consolidated income statement, identify two items;that may result in adjusting entries for accruals.;(c);What was the amount of depreciation expense for 2009 and;2008? (You will need to examine the notes to the financial statements or;the statement of cash flows.) Where was accumulated depreciation reported?;(d);What was the cash paid for income taxes during 2009;reported at the bottom of the consolidated statement of cash flows? What;was income tax expense (provision for income taxes) for 2009?;BYP4-2;COMPARATIVE ANALYSIS PROBLEM:Tootsie Roll vs. Hershey;The;financial statements ofThe Hershey Companyare presented in AppendixB, following the financial statements forTootsie Rollin AppendixA.;Instructions;(a);Identify two accounts on Hershey's balance sheet that;provide evidence that Hershey uses accrual accounting. In each case;identify the income statement account that would be affected by the;adjustment process.;(b);Identify two accounts on Tootsie Roll's balance sheet that;provide evidence that Tootsie Roll uses accrual accounting (different from;the two you listed for Hershey). In each case, identify the income;statement account that would be affected by the adjustment process.;Appendix A;Financial Statements and Accompanying Notes;The standard set of financial;statements consists of: (1) a comparative income statement for three years, (2);a comparative balance sheet for two years, (3) a comparative statement of cash;flows for three years, (4) a statement of retained earnings (or stockholders;equity) for three years, and (5) a set of accompanying notes that are;considered an integral part of the financial statements. The auditor's report;unless stated otherwise, covers the financial statements and the accompanying;notes. The financial statements and accompanying notes plus some supplementary;data and analyses forTootsie Roll Industriesfollow.;CONSOLIDATED STATEMENTS OF FINANCIAL POSITION;Assets;TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES;(in;thousands);December;31;2009;2008;CURRENT ASSETS;Cash and cash equivalents;$?90,990;$?68,908;Investments;8,663;17,963;Accounts receivable trade, less allowances of $2,356 and;$1,923;37,512;31,213;Other receivables;8,397;2,983;Inventories;Finished goods and work-in-process;35,570;34,862;Raw materials and supplies;20,817;20,722;Prepaid expenses;8,562;11,328;Deferred income taxes;1,367;609;Total current assets;211,878;188,588;PROPERTY, PLANT AND EQUIPMENT, at cost;Land;21,559;19,307;Buildings;102,374;89,077;Machinery and equipment;296,787;279,100;Construction in progress;6,877;20,701;427,597;408,185;Less?Accumulated depreciation;206,876;190,557;Net property, plant and equipment;220,721;217,628;OTHER ASSETS;Goodwill;73,237;73,237;Trademarks;175,024;189,024;Investments;58,136;49,809;Split dollar officer life insurance;74,642;74,808;Prepaid expenses;8,068;10,333;Investment in joint venture;4,961;9,274;Deferred income taxes;11,580;824;Total other assets;405,648;407,309;Total assets;$838,247;$813,525;(The accompanying notes are an integral part of these;statements.);Liabilities and Shareholders' Equity;(in;thousands except per share data);December;31;2009;2008;CURRENT LIABILITIES;Accounts payable;$??9,140;$?13,885;Dividends payable;4,458;4,401;Accrued liabilities;42,468;40,335;Total current liabilities;56,066;58,621;NONCURRENT LIABILITES;Deferred income taxes;44,582;45,410;Postretirement health care and life insurance benefits;16,674;15,468;Industrial development bonds;7,500;7,500;Liability for uncertain tax positions;21,101;19,412;Deferred compensation and other liabilities;39,839;32,344;Total noncurrent liabilities;129,696;120,134;SHAREHOLDERS' EQUITY;Common stock, $.69-4/9 par value?120,000 shares;authorized?35,802 and 35,658, respectively, issued;24,862;24,762;Class B common stock, $.69-4/9 par value?40,000 shares;authorized?19,919 and 19,357, respectively, issued;13,833;13,442;Capital in excess of par value;482,250;470,927;Retained earnings, per accompanying statement;145,928;142,872;Accumulated other comprehensive loss;(12,396);(15,241);Treasury stock (at cost)?67 shares and 65 shares;respectively;(1,992);(1,992);Total shareholders' equity;652,485;634,770;Total liabilities and shareholders' equity;$838,247;$813,525;CONSOLIDATED STATEMENTS OFEARNINGS, COMPREHENSIVE EARNINGS;AND RETAINED EARNINGS;TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES;(in;thousands except per share data);For the;year ended December 31;2009;2008;2007;Net product sales;$495,592;$492,051;$492,742;Rental and royalty revenue;3,739;3,965;4,975;Total revenue;499,331;496,016;497,717;Product cost of goods sold;318,645;333,314;327,695;Rental and royalty cost;852;921;1,349;Total costs;319,497;334,235;329,044;Product gross margin;176,947;158,737;165,047;Rental and royalty gross margin;2,887;3,044;3,626;Total gross margin;179,834;161,781;168,673;Selling, marketing and administrative expenses;103,755;95,254;97,821;Impairment charges;14,000;?;?;Earnings from operations;62,079;66,527;70,852;Other income (expense), net;2,100;(10,618);6,315;Earnings before income taxes;64,179;55,909;77,167;Provision for income taxes;10,704;17,132;25,542;Net earnings;$?53,475;$?38,777;$?51,625;Net earnings;$?53,475;$?38,777;$?51,625;Other comprehensive earnings (loss);2,845;(3,514);810;Comprehensive earnings;$ 56,320;$?35,263;$?52,435;Retained earnings at beginning of year.;$142,872;$156,752;$169,233;Net earnings;53,475;38,777;51,625;Cash dividends;(17,790);(17,492);(17,421);Stock dividends;(32,629);(35,165);(46,685);Retained earnings at end of year;$145,928;$142,872;$156,752;Earnings per share;$?0.95;$?0.68;$?0.89;Average Common and Class B Common shares outstanding;56,072;56,799;58,227;(The accompanying notes are an integral part of these;statements.);CONSOLIDATED STATEMENTS OFCASH FLOWS;TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES;(in;thousands);For the;year ended December 31;2009;2008;2007;CASH FLOWS FROM OPERATING ACTIVITIES;Net earnings;$ 53,475;$?38,777;$?51,625;Adjustments to reconcile net earnings to net cash;provided by operating activities;Depreciation;17,862;17,036;15,859;Impairment charges;14,000;?;?;Impairment of equity investment in joint venture;4,400;?;?;Loss from joint venture;233;477;?;Return on investment in joint venture;?;?;1,419;Other than temporary impairment;?;5,140;?;Amortization of marketable securities;320;396;521;Purchase of trading securities;(1,713);(491);(84);Changes in operating assets and liabilities;Accounts receivable;(5,899);(261);2,591;Other receivables;(2,088);(33);7;Inventories;(675);1,352;6,506;Prepaid expenses and other assets;5,203;(15,139);283;Accounts payable and accrued liabilities;(2,755);967;(3,234);Income taxes payable and deferred;(11,731);8,642;13,481;Postretirement health care and life insurance benefits;1,028;3,394;1,272;Deferred compensation and other liabilities;3,316;(2,385);(12);Other;305;(830);(170);Net cash provided by operating activities;75,281;57,042;90,064;CASH FLOWS FROM INVESTING ACTIVITIES;Proceeds from sale of real estate and other assets;?;?;434;Return of investment in joint venture;?;?;1,206;Capital expenditures;(20,831);(34,355);(14,767);Purchase of available for sale securities;(11,331);(33,977);(59,132);Sale and maturity of available for sale securities;17,511;61,258;28,914;Net cash used in investing activities;(14,651);(7,074);(43,345);CASH FLOWS FROM FINANCING ACTIVITIES;Shares repurchased and retired;(20,723);(21,109);(27,300);Dividends paid in cash;(17,825);(17,557);(17,542);Net cash used in financing activities;(38,548);(38,666);(44,842);Increase in cash and cash equivalents;22,082;11,302;1,877;Cash and cash equivalents at beginning of year;68,908;57,606;55,729;Cash and cash equivalents at end of year;$ 90,990;$?68,908;$?57,606;Supplemental cash flow information;Income taxes paid;$?22,364;$?12,728;$?11,343;Interest paid;$????182;$????252;$????537;Stock dividend issued;$?32,538;$?35,042;$?46,520;(The accompanying notes are an integral part of these;statements.);AppendixB;Appendix B;Specimen Financial Statements: The;Hershey Company

 

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