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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