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ACC 290 Financial Reporting Problem, Part II

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ACC 290 Financial Reporting Problem, Part II
ACC/290
University of Phoenix
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, & 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) short-term investments
(such as short-term U.S. government securities), (3) receivables (notes receivable,
accounts receivable, and interest receivable), (4) inventories, and (5) prepaid expenses
(insurance and supplies)” (Kimmel, Weygandt, & Kieso, 2011, p. 50).
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 short-
term 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

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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 long-term 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 short-term investments. These investments are
highly liquid and can easily be converted to cash (Stock Analysis on Net, 2011). The
short-term 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 $5,943,000 in cash and cash equivalents in its most recent
reporting period (Yahoo Finance, 2011). Its short-term investments were in the amount
of $426,000 in 2010.
The total current liabilities reported at the end of PepsiCo’s most recent annual reporting
period was, $15,892,000 (Yahoo Finance, 2011). This included the accounts payable
and short/current long-term debt. Accounts payable accounted for $10,994,000. 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. Short/current long-term debt made up the other
$4,898,000. 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 short/current 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 $8,756,000 in total current liabilities (Yahoo Finance,
2011). The total current liabilities encompass accounts payable, payables accrued,
accrued expenses, and notes payable/short-term 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 $8,292,000. Notes payable/short-term debt has total of $464,000.
The information that has been gathered is useful to employees, investors, and
any potential creditors. The company can use this information in various ways

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ACC 290 Financial Reporting Problem, Part II ACC/290 University of Phoenix 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, & 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 compan ...
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