ACIS 5104-Fundamentals of Accounting Case Assignment II, Fall 2018 Instructor: Sudip Bhattacharjee Objectives:  To examine issues around accounts receivable disclosures.  To develop the skills required for analyzing financial statements. Instructions:  This is a graded homework assignment. You can use your book and notes to complete this assignment. However, please work on the case individually.  Please read the attached case information carefully and answer all questions below. Please write concisely and clearly, using your best composition skills (type all your responses).  This assignment is due on November 26, 2018. Please use the Assignments function in Canvas to submit your assignment prior to class on the due date. Requirements a. Based on the financial information provided on the next page, what is Leggett & Platt, Inc.’s gross amount of receivables at the end of 2016 and 2015? b. Compute the common-size amount for gross accounts receivable, for both years (to common-size a balance sheet item, it is expressed as a percentage of total assets). Interpret the year-over-year change in this ratio. c. Compute the allowance for doubtful accounts to gross accounts receivable, for both years. Interpret the year-over-year change in this ratio. d. Based on the ratios you calculated, form an opinion about the quality of the company’s accounts receivable. e. How can companies use accounts receivables to shift income between financial accounting periods? Explain why managers engage in this sort of activity. Discuss how companies would justify such income shifting choices to the external auditor. Leggett & Platt, Inc. reported net sales of $3,749.9 million in 2016 and $3,917.2 million in 2015. The asset side of the balance sheet follows. Use this information to answer the required. LEGGETT & PLATT, INCORPORATED Consolidated Balance Sheets (excerpts) (in millions) Current Assets Cash and cash equivalents Trade receivables, net of allowance $7.2 and $9.3, at December 31, 2016 and 2015, respectively Other receivables, net Total receivables, net Inventories Finished goods Work in process Raw materials and supplies LIFO reserve Total inventories, net Prepaid expenses and other current assets Total current assets Property, plant and equipment – at cost Machinery and equipment Buildings and other Land Total property, plant and equipment Less accumulated depreciation Net property, plant and equipment Other Assets Goodwill Other intangibles, less accumulated amortization of $137.0 and $139.8 at December 31, 2016 and 2015, respectively Sundry Total other assets Total assets Dec. 31, 2016 Dec. 31, 2015 $281.9 $ 253.2 450.8 35.8 486.6 448.7 71.5 520.2 255.7 52.6 245.1 (33.8) 519.6 36.8 1,324.9 242.8 42.6 241.8 (22.6) 504.6 33.2 1,311.2 1,133.8 559.4 37.7 1,730.9 (1,165.4) 565.5 1,099.1 548.2 40.0 1,687.3 (1,146.5) 540.8 791.3 806.1 164.9 137.5 1,093.7 $2,984.1 188.4 117.2 1,111.7 $2,963.7
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