The financial statements of The Hershey Company and Tootsie Roll are presented b

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In its first month of operation, Kuhlman Company purchased 350 units of inventory for $4, then 450 units for $5, and finally 390 units for $6. At the end of the month, 420 units remained. Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO. Phantom profit $ Sadowski Video Center accumulates the following cost and market data at December 31. Inventory Categories Cost Data Cameras Camcorders DVDs Market Data $12,391 8,391 10,148 $13,551 9,121 9,008 Compute the lower-of-cost-or-market valuation for Sadowski inventory. The lower-of-cost-or-market value $ The financial statements of The Hershey Company and Tootsie Roll are presented below. THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31, 2011 2010 2009 In thousands of dollars except per share amounts Net Sales $6,080,788 $5,671,009 $5,298,668 Costs and Expenses: Cost of sales 3,548,896 3,255,801 3,245,531 Selling, marketing and administrative 1,477,750 1,426,477 1,208,672 83,433 82,875 5,025,760 4,765,711 4,537,078 1,055,028 905,298 761,590 92,183 96,434 90,459 962,845 808,864 671,131 333,883 299,065 235,137 Business realignment and impairment (credits) charges, net Total costs and expenses Income before Interest and Income Taxes Interest expense, net Income before Income Taxes Provision for income taxes (886) Net Income $628,962 $509,799 $435,994 Net Income Per Share—Basic—Class B Common Stock $2.58 $2.08 $1.77 Net Income Per Share—Diluted—Class B Common Stock $2.56 $2.07 $1.77 Net Income Per Share—Basic—Common Stock $2.85 $2.29 $1.97 Net Income Per Share—Diluted—Common Stock $2.74 $2.21 $1.90 $1.3800 $1.2800 $1.1900 1.2500 1.1600 1.0712 Cash Dividends Paid Per Share: Common Stock Class B Common Stock The notes to consolidated financial statements are an integral part of these statements and are included in the Hershey's 2011 Annual Report, available at www.thehersheycompany.com. THE HERSHEY COMPANY CONSOLIDATED BALANCE SHEETS December 31, 2011 2010 Cash and cash equivalents $693,686 $884,642 Accounts receivable—trade 399,499 390,061 Inventories 648,953 533,622 Deferred income taxes 136,861 55,760 Prepaid expenses and other 167,559 141,132 2,046,558 2,005,217 1,559,717 1,437,702 Goodwill 516,745 524,134 Other Intangibles 111,913 123,080 38,544 21,387 Other Assets 138,722 161,212 Total assets $4,412,199 $4,272,732 In thousands of dollars ASSETS Current Assets: Total current assets Property, Plant and Equipment, Net Deferred Income Taxes LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $420,017 $410,655 Accrued liabilities 612,186 593,308 1,899 9,402 Short-term debt 42,080 24,088 Current portion of long-term debt 97,593 261,392 1,173,775 1,298,845 1,748,500 1,541,825 617,276 494,461 3,539,551 3,335,131 — — — — 299,269 299,195 60,632 60,706 490,817 434,865 4,699,597 4,374,718 (4,258,962) (4,052,101) (442,331) (215,067) 849,022 902,316 23,626 35,285 872,648 937,601 $4,412,199 $4,272,732 Accrued income taxes Total current liabilities Long-term Debt Other Long-term Liabilities Total liabilities Commitments and Contingencies Stockholders’ Equity: The Hershey Company Stockholders’ Equity Preferred Stock, shares issued: none in 2011 and 2010 Common Stock, shares issued: 299,269,702 in 2011 and 299,195,325 in 2010 Class B Common Stock, shares issued: 60,632,042 in 2011 and 60,706,419 in 2010 Additional paid-in capital Retained earnings Treasury—Common Stock shares, at cost: 134,695,826 in 2011 and 132,871,512 in 2010 Accumulated other comprehensive loss The Hershey Company stockholders’ equity Noncontrolling interests in subsidiaries Total stockholders’ equity Total liabilities and stockholders’equity THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2011 2010 2009 $628,962 $509,799 $435,994 In thousands of dollars Cash Flows Provided from (Used by) Operating Activities Net income Adjustments to reconcile net income to net cash provided from operations: Depreciation and amortization Stock-based compensation expense, net of tax of $15,127, $17,413 and $19,223, respectively Excess tax benefits from stock-based compensation Deferred income taxes Gain on sale of trademark licensing rights, net of tax of $5,962 215,763 197,116 182,411 28,341 32,055 34,927 (1,385) (4,455) (18,654) (40,578) (13,997) 33,611 (11,072) — — 60,823 Business realignment and impairment charges, net of tax of $18,333, $20,635 and $38,308, respectively 30,838 77,935 Contributions to pension plans (8,861) (6,073) (9,438) 20,329 46,584 (13,910) 74,000 90,434 37,228 13,777 293,272 580,867 901,423 1,065,749 (323,961) (179,538) (126,324) (23,606) (21,949) (19,146) (54,457) Changes in assets and liabilities, net of effects from business acquisitions and divestitures: Accounts receivable—trade Inventories Accounts payable Other assets and liabilities Net Cash Provided from Operating Activities (115,331) 7,860 (205,809) Cash Flows Provided from (Used by) Investing Activities Capital additions Capitalized software additions Proceeds from sales of property, plant and equipment 312 2,201 10,364 Proceeds from sales of trademark licensing rights 20,000 — — Business acquisitions (5,750) — Net Cash (Used by) Investing Activities (333,005) (199,286) (15,220) (150,326) Cash Flows Provided from (Used by) Financing Activities Net change in short-term borrowings Long-term borrowings Repayment of long-term debt Proceeds from lease financing agreement Cash dividends paid Exercise of stock options Excess tax benefits from stock-based compensation 10,834 1,156 249,126 348,208 (256,189) 47,601 (304,083) (71,548) — (283,434) (458,047) — (8,252) — (263,403) 184,411 92,033 28,318 13,997 1,385 4,455 Contributions from noncontrolling interests in subsidiaries Repurchase of Common Stock — 10,199 7,322 (384,515) (169,099) (9,314) Net Cash (Used by) Financing Activities (438,818) (71,100) (698,921) (Decrease) Increase in Cash and Cash Equivalents (190,956) 631,037 216,502 884,642 253,605 37,103 $693,686 $884,642 $253,605 Interest Paid $97,892 $97,932 $91,623 Income Taxes Paid 292,315 350,948 252,230 Cash and Cash Equivalents as of January 1 Cash and Cash Equivalents as of December 31 TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data) For the year ended December 31, 2011 2010 2009 $528,369 $517,149 $495,592 4,136 4,299 3,739 Total revenue 532,505 521,448 499,331 Product cost of goods sold 365,225 349,334 319,775 1,038 1,088 852 Total costs 366,263 350,422 320,627 Product gross margin 163,144 167,815 175,817 3,098 3,211 2,887 Total gross margin 166,242 171,026 178,704 Selling, marketing and administrative expenses 108,276 106,316 103,755 — — 14,000 57,966 64,710 60,949 2,946 8,358 2,100 Earnings before income taxes 60,912 73,068 63,049 Provision for income taxes 16,974 20,005 9,892 Net earnings $43,938 $53,063 $53,157 Net earnings $43,938 $53,063 $53,157 Net product sales Rental and royalty revenue Rental and royalty cost Rental and royalty gross margin Impairment charges Earnings from operations Other income (expense), net Other comprehensive earnings (loss) 1,183 2,845 $35,198 $54,246 $56,002 $135,866 $147,687 $144,949 43,938 53,063 53,157 Cash dividends (18,360) (18,078) (17,790) Stock dividends (47,175) (46,806) (32,629) Comprehensive earnings Retained earnings at beginning of year. (8,740) Net earnings Retained earnings at end of year $114,269 $135,866 $147,687 $0.76 $0.90 $0.89 57,892 58,685 59,425 Earnings per share Average Common and Class B Common shares outstanding (The accompanying notes are an integral part of these statements.) CONSOLIDATED STATEMENTS OF Financial Position TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data) Assets December 31, 2011 2010 $78,612 $115,976 Investments 10,895 7,996 Accounts receivable trade, less allowances of $1,731 and $1,531 41,895 37,394 3,391 9,961 Finished goods and work-in-process 42,676 35,416 Raw materials and supplies 29,084 21,236 5,070 6,499 578 689 212,201 235,167 21,939 21,696 Buildings 107,567 102,934 Machinery and equipment 322,993 307,178 CURRENT ASSETS: Cash and cash equivalents Other receivables Inventories: Prepaid expenses Deferred income taxes Total current assets PROPERTY, PLANT AND EQUIPMENT, at cost: Land Construction in progress 2,598 9,243 455,097 440,974 Less—Accumulated depreciation 242,935 225,482 Net property, plant and equipment 212,162 215,492 73,237 73,237 Trademarks 175,024 175,024 Investments 96,161 64,461 Split dollar officer life insurance 74,209 74,441 Prepaid expenses 3,212 6,680 Equity method investment 3,935 4,254 Deferred income taxes 7,715 9,203 433,493 407,300 $857,856 $857,959 OTHER ASSETS: Goodwill Total other assets Total assets Liabilities and Shareholders’ Equity December 31, 2011 2010 CURRENT LIABILITIES: Accounts payable $10,683 $9,791 4,603 4,529 Accrued liabilities 43,069 44,185 Total current liabilities 58,355 58,505 Deferred income taxes 43,521 47,865 Postretirement health care and life insurance benefits 26,108 20,689 Industrial development bonds 7,500 7,500 Liability for uncertain tax positions 8,345 9,835 48,092 46,157 133,566 132,046 25,333 25,040 Dividends payable NONCURRENT LIABILITES: Deferred compensation and other liabilities Total noncurrent liabilities SHAREHOLDERS’ EQUITY: Common stock, $.69-4/9 par value—120,000 shares authorized—36,479 and 36,057 respectively, issued Class B common stock, $.69-4/9 par value—40,000 shares authorized— 21,025 and 20,466 respectively, issued 14,601 14,212 Capital in excess of par value 533,677 505,495 Retained earnings, per accompanying statement 114,269 135,866 Accumulated other comprehensive loss (19,953) (11,213) (1,992) (1,992) Treasury stock (at cost)—71 shares and 69 shares, respectively Total shareholders’ equity Total liabilities and shareholders’ equity 665,935 667,408 $857,856 $857,959 TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF Cash Flows (in thousands) For the year ended December 31, 2011 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $43,938 $53,063 $53,157 19,229 18,279 17,862 Impairment charges — — 14,000 Impairment of equity method investment — — 4,400 194 342 233 1,267 522 320 (5,448) 717 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation Loss from equity method investment Amortization of marketable security premiums Changes in operating assets and liabilities: Accounts receivable Other receivables Inventories Prepaid expenses and other assets 3,963 (15,631) (2,373) (1,447) (5,899) (2,088) 455 5,106 4,936 5,203 84 2,180 (2,755) (5,772) 2,322 (12,543) Postretirement health care and life insurance benefits 2,022 1,429 1,384 Deferred compensation and other liabilities 2,146 2,525 2,960 310 305 Accounts payable and accrued liabilities Income taxes payable and deferred Others (708) Net cash provided by operating activities 50,390 82,805 76,994 (16,351) (12,813) (20,831) (3,234) (2,902) (1,713) (39,252) (9,301) (11,331) 8,208 17,511 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures Net purchase of trading securities Purchase of available for sale securities Sale and maturity of available for sale securities 7,680 Net cash used in investing activities (51,157) (16,808) (16,364) Shares repurchased and retired (18,190) (22,881) (20,723) Dividends paid in cash (18,407) (18,130) (17,825) Net cash used in financing activities (36,597) (41,011) (38,548) Increase (decrease) in cash and cash equivalents (37,364) 24,986 22,082 Cash and cash equivalents at beginning of year 115,976 90,990 68,908 Cash and cash equivalents at end of year $78,612 $115,976 $90,990 $16,906 $20,586 $22,364 $38 $49 $182 $47,053 $46,683 $32,538 CASH FLOWS FROM FINANCING ACTIVITIES: Supplemental cash flow information Income taxes paid Interest paid Stock dividend issued (The accompanying notes are an integral part of these statements.) Based on the information in the financial statements, compute these 2011 values for each company. (Do not adjust for the LIFO reserve.) (Round answers to 1 decimal place, e.g. 15.2.) (1) Inventory turnover. (Use product cost of goods sold and total inventory.) (2) Days in inventory. Tootsie Roll Hershey Company Inventory turnover ratio times times Days in inventory days days
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