PMBA PB6020 Accounting

Trimester 1: July 2020 to October 2020

Seminar Questions and Cases.
This file contains the group presentation and written assignment questions from Trimester 1
(July 2020 to October 2020).

Instructions for submission of group presentation.

1. Each team should submit a written report on the weekly preset cases and questions on
two calendar days (10 am deadline) before the start of class in each week. Late
submissions will not be graded. For example, if your class is on Saturday 10 January 20X1,
your team should submit the written report by Friday 8 January 20X1 (10 am).
2. The report should contain clear, concise and precise complete sentences. Bonus points
will be awarded to a report that directly and accurately addresses the relevant issues in a clear
and concise manner.
3. The report should be typed based on this format
-Times New Roman font size 11
-one and a half (1.5) line spacing
-maximum length of twenty (20) single-sided pages (excluding cover page – see below). Any
material beyond page 20 will not be graded. All pages must be numbered.
- If your report contains tables and excel spreadsheets, ensure they are properly formatted in
your word file (e.g. font-size 11) to facilitate printing the entire MS-word document in one-
step.
- You should clearly show your workings and narration/ explanations. An answer without
workings and narration/ explanations such as “revised net profit = 100 + 30 - 10 = 120” will
be given zero marks.
4. There will be a 30% penalty for non-compliance of the required format.
5. Submissions that contain plagiarism will be given zero marks.
6. To be fair to all students, the instructors will not discuss the assignment with any
student prior to the scheduled in-class presentation. The non-presenting students and the
instructor will play an active role in class to comment, challenge and critique the presentation
done by the presenting team. By the second calendar day after the presentation, the presenting
team should update their presentation material (e.g. incorporate in-class comments and rectify
errors) and post their word file on the course intranet-website for sharing with all students.

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Both the presenting team and the instructors will not bear responsibility for the usage of the
posted presentation material.

7. To create the appropriate incentive for each student to prepare for the weekly
assignment, the instructors will not be posting any solution to the questions. If you are absent
from class, please follow-up with your class members.

8. Format of cover page:

Date and time of class: Saturday 10 January 20X1
Team number : Three
Full Name (as per class list) of each student in the % contribution**
team
1
2
3
4
5
Total 100%
** State each team member’s contribution to the completion of this project. For example,
for a team of 5 members, if all members have equal contribution, the % stated above will be
20% for each team member. This means that all 5 members will have the same score for this
project. Unequal contribution means that members within the same team will have different
scores. You are required to be honest in stating each member’s contribution.

10. Email correspondence

We welcome your questions. For efficiency purposes, you should adhere to these guidelines
in your email communication with us:-
1. Use your NTU email account. Write clearly, precisely and concisely using
complete words and sentences.
2. To encourage individual learning responsibility, outline your initial views and
response to your questions so that we know your current position and potential problem
areas. In general, we will not answer to emails that do not outline your initial views and
response to your questions.
3. We will give priority to those who demonstrated initiatives to help themselves.
Due to the recent changes in the financial reporting standards, we will not review (nor
comment) your attempt on
a) past year examination questions
b) additional questions in the textbook that are not covered in seminars.

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Where appropriate, we have incorporated several relevant past year examination questions
(such as those that are not superseded by recent changes in the financial reporting standards)
into the weekly discussion questions. We assume that you have been diligently attending the
seminars and following up class discussion with your classmates (if you are absent from
specific seminar).

11. Submission of group project report

All teams for the scheduled week will have to submit their presentation report (in a MS-
word file) by the stipulated due date. Late submissions will NOT be graded. If there is
evidence of cheating (e.g. where the presentations among different groups are unusually
similar), the NTU rules on dealing with cheating will be invoked. To test the integrity of the
presentations, questions will be asked to each presenter to assess his original preparation.
Thus, each presenter must be fully conversant with ALL material submitted in his team’s
presentation report. The rest of the class should prepare properly for the weekly questions to
enhance the quality of the in-class discussion.
The group allocations are as follows:
Project Presenting Team Deadline for submission
1 1 Thursday 20 August 2020 (10 am)
2 2 Thursday 20 August 2020 (10 am)
3 3 Thursday 20 August 2020 (10 am)
4 4 Thursday 20 August 2020 (10 am)
5 5 Thursday 3 September 2020 (10 am)
6 6 Thursday 3 September 2020 (10 am)
7 7 Thursday 3 September 2020 (10 am)
8 8 Thursday 3 September 2020 (10 am)

12. Allocation of team for individual participation

To ensure every student has an opportunity to contribute to individual participation, we will
allocate the following “formal participating teams” :-
Quiz Number # Formal Participating Team

1 Team # 1, Team # 2, Team # 3 and Team #

4.

2 Team # 5, Team # 6, Team # 7 and Team #

8.

3 Team # 1, Team # 2, Team # 3 and Team #

4.

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 4 Team # 5, Team # 6, Team # 7 and Team #
8.

Every student in the participating team is expected to review the pre-set seminar material and
lecture slides before the seminar. During the seminar, every student in the participating team
has an opportunity to contribute to individual participation.

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Project #1 – Interpretation of financial statements and the accounting cycle to capture
economic events

Question 1
This case involves interpretation of Walmart 2020 annual report.
https://s2.q4cdn.com/056532643/files/doc_financials/2020/ar/Walmart_2020_Annual_Report
.pdf

Refer to the consolidated financial statements for financial year ended 31 January 2020.
a) Refer to the company’s consolidated income statement. What is company’s
consolidated net profit after tax in 2020? What is company’s consolidated net profit after tax
in 2019? Based on net profit after tax, did the company’s financial performance improve
from 2019 to 2020? Briefly explain (maximum 80 words) why the did the company’s net
income after tax change from 2019 to 2020. Focus on the information on the consolidated
income statement and notes to the accounts. You are not required to search for information
beyond the annual report.
b) Refer to the company’s consolidated statement of financial position (use the
information in the “group” column). Write out the accounting equation as at 31 January 2020.
How did the company finance its assets as at 31 January 2020? Write out the accounting
equation as at 31 January 2019. How did the company finance its assets as at 31 January
2019?
c) Refer to the company’s consolidated statement of cash flow. Consider its (i) cash flow
from operations, (ii) cash flow from investing activities and (iii) cash flow from financing
activities. Briefly comment on the company’s overall cash flow generation in 2019 and 2020.
Is it healthy or weak?
d) Using 2020 financial statements, what is the financial impact (consider the impact on the
net income after tax, statement of financial position and cash flow generation) :-
(i) if the company write off the entire prepaid expenses to the income statement
(ii) 60% of the accounts receivables defaulted before the financial year end.
Ignore tax effects.

Question 2
WHBC Problem 3.4A on page 132.
In addition to parts (a), (b), (c), (d), and (e) in WBHC, you should prepare a properly
classified statement of financial position as at 30 June current year and income statement for
year ended 30 June current year.

Question 3
WHBC Problem 4.6A on page 182.

Question 4
WHBC Problem 5.6A on page 236.

Question 5
WHBC Problem 7.3A on page 332.

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Project # 2 – Property, Plant and Equipment and Intangible Assets

Question 1
WHBC Problem 8.5A on page 379.
Assume all units were sold during the year at the selling price of $400 per unit.

Assuming inflation (i.e. rising prices over time), in part (a), you should:-
i) Compute the gross profit margin and inventory turnover under each inventory
method.
ii) Explain which method gives the highest gross profit margin.
iii) Explain which method gives the highest inventory turnover.

Question 2
WHBC Problem 8.6A on page 380.

Question 3
WHBC Problem 9.3A on page 425.

Question 4
This case involves interpretation of a Pepsi’s financial statements from the perspective of a
financial analyst. A substantial portion of Pepsi’s total assets consists of property, plant and
equipment and intangible assets. The following information is taken from Pepsi Co’s 2017
annual report.
All figures are in $ million.

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Required
a) Estimate the useful life of the company’s property, plant and equipment
for both years. State your assumptions.

b) Estimate the useful life of the company’s intangible assets for both years.
State your assumptions.

c) Briefly explain two factors that affect the reliability and accuracy of your
estimates in part (a) and part (b).

d) In 2017, Pepsi reported a net income before tax of $9,602 million. In

Pepsi’s annual report, the company stated that “Our beverage, food and snack products
are in highly competitive categories and markets and compete against products of
international beverage, food and snack companies that, like us, operate in multiple
geographies, as well as regional, local and private label manufacturers, economy brands

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 and other competitors. In many countries in which our products are sold, including the
United States, The Coca-Cola Company is our primary beverage competitor. Other
beverage, food and snack competitors include, but are not limited to, DPSG, Kellogg
Company, The Kraft Heinz Company, Mondel z International, Inc., Monster Beverage,
Nestlé S.A., Red Bull GmbH and Snyder’s-Lance, Inc.” Suppose the average useful life
of Pepsi’s competitors is 10 years. Compute a revised estimate of Pepsi’s depreciation
expense for year 2017 using the estimated useful life of Pepsi’s competitors. Use this
amount to recalculate Pepsi’s net income before tax for year ended 2017.

e) Why might a financial analyst wish to make the adjustments in part (d)?

f) Determine the capital expenditure incurred (in property, plant and

equipment) in year 2017 assuming there is negligible disposal of property, plant and
equipment in year 2017. Ignoring depreciation expense, what is the impact of capital
expenditure incurred (in property, plant and equipment) in year 2017 on the income
statement, statement of cash flow and statement of financial position if the capital
expenditure was financed by:-
i) Cash
ii) New borrowings from a bank.
iii) New share capital issued

g) Financial analysts generate various financial statements forecasts under

several assumptions and scenarios. Consider these independent scenarios:-

(i) Suppose the company dispose its entire intangible assets for a cash consideration
$1,500 million on 1 January 2018. Outline the journal entry to recognize the disposal
of the intangible assets. What is the effect of the disposal of the intangible assets on
the income statement, statement of cash flow and statement of financial position for
year ended 2018?

(ii) Suppose all the property, plant and equipment was fully impaired on 1 January
2018. What is the effect of the impairment of the property, plant and equipment on the
income statement, statement of cash flow and statement of financial position for year
ended 2018?

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 Group Project # 3 - LIABILITIES AND EQUITY

Question 1
WHBC Problem 10.2A on page 476.

Question 2
The following cases are independent:-
Case A
Company A sells televisions and provides a 3 years warranty against defects. Based on past
experience, the estimated warranty costs are approximately 9% of sales.

Sales & actual warranty expenses for the first 3 years of business:-
– Year Sales Actual Warranty expenses
– 20X2 800,000 6,500
– 20X3 1,100,000 17,200
– 20X4 1,200,000 62,000
What should A report as liability in its 31-12-20X4 balance sheet?

Case B
With some of its products, Company B includes coupons that are redeemable in merchandise.
The coupons have no expiry date and based on past experience, 40% of them are redeemed.
The liability for unredeemed coupons at 31-12-20X3 was $9,000. During 20X4, coupons
worth $25,000 were issued and merchandise worth $8,000 was distributed in exchange for
coupons redeemed.
What should B report as liability in its 31-12-20X4’s balance sheet?

Case C
During 20X4, company C was involved in a tax dispute with Inland Revenue Services (IRS).
C’s lawyers indicated that they believe that it is probable that C will lose this dispute. They
also believe that C will have to pay the IRS between $900,000 and $1,400,000. After the
20X4 financial statements were issued, the case was settled with IRS for $1,200,000. What
amount should be reported, if any, as a liability for this contingency as of 31-12-20X4?

Case D
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On 20 December 20X2, a governmental environmental agency is in the process of
investigating possible toxic chemical leaks at Company HOLT’s facilities, but has not
proposed a deficiency assessment. Management of Company HOLT considers an assessment
is possible, and if an assessment is made an unfavorable settlement of up to $10 million is
possible. Explain what should HOLT report in its financial statements at year ended 31
December 20x2?

Question 3
WHBC Problem 11.4A on page 515.

Question 4
The following case involves analysis of financing choices.
Singapore Technologies Engineering Ltd is large listed firm in Singapore.
The condensed financial statements of the company are as follow:-
Figures in SGD million
Income statement for Year ended 31 December 20x1

Net Income before tax 623.0

Tax expense (125.0)
Net Income after tax 498.0

Balance sheet as at 31 December 20x1

Cash 999.0
Property, Plant and Equipment 1,720.0
Other Assets 5,754.0
Total Assets 8,473.0

Accounts Payable 3,900.0

Long term borrowings 2,051.0
Total Liabilities 5,951.0

Share Capital 896.0

Treasury Shares (23.0)
Retained Earnings 1,314.0
Other reserves 335.0
Total Equity 2,522.0

Total Liabilities and Equity 8,473

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Part A
Compute the following ratios based on the above financial statements.
(i) Return on assets defined as net income after tax divided by total assets
(ii) Return on equity defined as net income after tax divided by total shareholders’
equity
(iii) Liabilities-to-assets defined as total liabilities divided by total assets.

Part B
The board of directors are considering the following independent financing proposals as at 31
December 20X1:-
1) Purchase a new equipment (estimated cost $500 million) financed by a bond (face
value of $500 million) issued at par of 3% per year.
2) Purchase a new equipment (estimated cost $500 million) financed by issuing ordinary
share capital (i.e. common stock) of $500 million.
3) Purchase a new equipment (estimated cost $500 million) financed by issuing
preference share capital (i.e. preference stock) of $500 million.

Compute the following adjusted ratios as at 31 December 20X1 under each of the above
independent financing proposals:-
(i) Return on assets defined as net income after tax divided by total assets
(ii) Return on equity defined as net income after tax divided by total shareholders’
equity
(iii) Liabilities-to-assets defined as total liabilities divided by total assets.
[Note: As the financing is proposed on 31 December 20x1, you can ignore the financing
charges such as interest expense on the bonds, ordinary dividends on the additional ordinary
shares and preferred dividends on the additional preference shares. You may wish to
reconstruct the revised financial statement under each of the above independent financing
proposals. As there are 3 ratios per proposal and 3 proposals, there will be 3 x 3 = 9 ratios in
part B.]
Briefly explain (in one page) which financing proposal will you recommend.

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Project #4 – Statement of Cash Flow and Financial Statement Analysis

Question 1
WHBC Problem 13.8A on page 616.

Question 2
The 20X6 financial statements for Byron and Shelley companies are summarised here:
Byron Shelley
Company Company
Balance Sheet
Cash $ 20,750 $ 37,350
Accounts receivable (net) 45,650 4,150
Inventory 91,300 20,750
Property, plant and equipment (net) 456,500 132,800
Long-term investments 116,200 47,310
Total assets $730,400 $242,360

Current liabilities $ 99,600 $ 12,450

Long-term debt 157,700 45,650
Share capital 439,900 177,620
Retained earnings 33,200 6,640
Total liabilities and stockholders’ equity $730,400 $242,360

Income Statement
Sales revenue $664,000 $232,400
Cost of goods sold (380,400) (124,500)
Expenses (including interest and income tax) (217,200) (78,850)
Net income $ 66,400 $ 29,050

These two companies are in the same line of business. Each company has been in operation
for about 10 years. Half of Byron’s sales are on credit while a quarter of Shelley’s sales are
on credit.
Byron Company wants to borrow $60,000 cash, and Shelley Company wants to borrow
$30,000 cash. The loans will be for a two-year period and are needed for “working capital
purposes.”
Required
(a) Compute the following ratios for Byron Company and Shelly Company:-
i) Net profit margin
ii) Return on assets

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 iii) Return on equity
iv) Current ratio
v) Quick ratio
vi) Receivables turnover
vii) Inventory turnover
viii) Liability to asset ratio
ix) Debt-to-equity ratio

(b) Assume that you work in the loan department of a bank. You have been asked to
analyse the situation and recommend which loan is preferable. Based on the data
given and your analysis, give your choice and the supported explanation.

Question 3 : Kodak
The following article was sourced from Bloomberg 19 Jan 2012.
Kodak Files for Bankruptcy as Digital Era Spells End to Film
By Dawn McCarty and Beth Jinks - Jan 19, 2012
Eastman Kodak Co. (EK), the photography pioneer that introduced the Brownie Camera
more than a century ago, filed for bankruptcy after consumers embraced digital cameras, a
technology Kodak invented and failed to commercialize.
The Rochester, New York-based company, which traces its roots to 1880, listed assets of $5.1
billion and debt of $6.8 billion in Chapter 11 documents filed in U.S. Bankruptcy Court in
Manhattan. “They were a company stuck in time,” said Robert Burley, an associate professor
at Toronto’s Ryerson University who has photographed shuttered Kodak facilities in the U.S.,
Canada and France since 2005. “Their history was so important to them, this rich century-old
history when they made a lot of amazing things and a lot of money along the way. Now their
history has become a liability.” The company’s credit deteriorated as revenue tumbled from
traditional film, and the inventor of the Instamatic cameras was slow during the past decade
to compete with Canon Inc. and Hewlett-Packard Co. in digital cameras and printers.
Moody’s Investors Service on Jan. 5 cut ratings on about $1 billion of Kodak debt with a
negative outlook, citing “a heightened probability of a bankruptcy over the near-term.”
NYSE Regulation Inc. today said it would suspend trading of Kodak stock after determining
the company is “no longer suitable for listing,” according to a statement.

Citigroup Loan
Citigroup Inc. agreed to provide a $950 million debtor-in- possession loan to help Kodak
operate during bankruptcy, the photo company said today in a statement. The loan must be
approved by a bankruptcy judge. “Kodak is taking a significant step toward enabling our
enterprise to complete its transformation,” Antonio M. Perez, chief executive officer, said in
the statement. The company plans to sell “significant assets” during the bankruptcy, Chief
Financial Officer Antoinette McCorvey said in a court filing. She didn’t elaborate. As it
watched digital dissolve its high-margin film business, Kodak has shed 47,000 employees
since 2003, closing 13 factories that produced film, paper and chemicals, along with 130
photo laboratories. The restructuring has already cost $3.4 billion, because it was done “in a
socially responsible” way, said a spokesman, Christopher Veronda.

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“The announcement that Kodak is filing for bankruptcy is difficult and disappointing news
for the city and people of Rochester,” New York Governor Andrew Cuomo said in a
statement.

Annual Loss
Kodak, headed for its sixth annual loss in the past seven years, tried to sell more than 1,100
digital-imaging patents and pursued royalties to fund a shift to modern commercial and
consumer digital printers. Kodak’s cash and equivalents fell to $862 million at the end of its
third quarter from $1.4 billion a year earlier. The company is scheduled to report fourth-
quarter results Jan. 26. Kodak’s revenue has fallen by half since 2005 to $7.2 billion last
year, with further declines predicted this year and next after film and photofinishing unit sales
sank by 14 percent in the second quarter. The company’s losses since 2008 exceeded $1.76
billion.

Bonds Fall
Kodak’s $250 million of 7.25 percent senior unsecured notes due in November 2013 fell 3.5
cents to 29.5 cents on the dollar as of 10:06 a.m. In New York, according to Trace, the bond
price reporting system of the Financial Industry Regulatory Authority. The notes fell as low
as 27 cents today and have plunged from 100 cents on the dollar, or face value, in April and
48.5 cents in November. Shares of Kodak slumped 35 percent to 36 cents at 12:55 p.m. New
York time. The Rochester, New York-based company’s stock symbol changed to “EKDKQ”
from “EK.” The Bank of New York Mellon Corp. (BK) is listed as Kodak’s biggest
unsecured creditor as trustee for about $670 million of unsecured notes. Other unsecured
creditors include Sony Studios, which is owed $16.7 million, Warner Brothers, with $14.2
million, and Alcoa Inc., with $2.8 million. Bank of New York Mellon is also listed as the
biggest secured creditor with a claim of $776 million, backed by all of Kodak’s U.S. assets
except for those exempted in a 1988 agreement, according to the filing.

Inkjet Printers
Perez, a former Hewlett-Packard executive who took charge at Kodak in 2005, tried to rescue
the brand by cutting costs and winning shelf space for inkjet printers at Wal-Mart Stores Inc.
and Staples Inc. He pushed its commercial digital printers into publishing and packaging,
touting their flexibility over old- school printing plates. Kodak was five years too late to
accelerate its shift to the digital age, Perez, 65, said in an interview in August. Kodak hasn’t
sold enough printers and presses to create sufficient demand for replacement ink and supplies
and service contracts to end losses in those units. In February, it projected operating profits in
consumer and commercial inkjet printing by the end of 2013. “Essentially they’re moving
away from a very profitable model that generated multiple sales -- most everyone got double
prints -- to one that’s awfully difficult to make a profit in,” said John Ward, a 20-year Kodak
veteran who is now a lecturer in Rochester Institute of Technology’s college of business.

Few Options
“Perez had a clear understanding that change had to happen and it had to happen quickly,”
said Ward, 49, who met Perez shortly after he joined Kodak as president and chief operating
officer in 2003. “Clearly they could have made some changes faster, but there just weren’t a
lot of options to replace the film business.” “Out of the bankruptcy proceedings, a much
smaller company can emerge,” Don Strickland, a former Kodak vice president for digital
imaging, said in a Bloomberg television interview. “But I really don’t believe that there’s
going to be another Kodak moment.” The process to sell Kodak’s patents out of bankruptcy
will start now and it might take a couple of months, said a person with direct knowledge of

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the situation. Kodak recently stepped up its campaign to extract more cash from its patent
portfolio. The company yesterday sued Samsung Electronics Co. (005930) in a case that
claims the Galaxy tablet infringes technology for capturing and sending digital images. Last
week the company sued HTC Corp. and Apple Inc. (AAPL) and also has cases against
Research In Motion Ltd. and Fujifilm Holdings Corp.

Samsung Dispute
Samsung in 2010 agreed to pay Kodak $550 million to settle another patent dispute in which
the Suwon, South Korea-based handset maker had been accused of infringing a patent for a
feature that lets users preview images on their cameras using less processing power and
storage. Kodak was founded by George Eastman, who developed a method for dry-plate
photography before introducing the Kodak camera in 1888, according to the company’s
website. It went on to invent film, enabling Thomas Edison to develop the motion picture
camera, as well as Brownie cameras selling for $1 and Kodachrome film. Paul Simon
immortalized the film in his 1973 song “Kodachrome.” The single, which praised
Kodachrome’s “nice bright colors,” peaked at No. 2 on the Billboard Hot 100 chart. Kodak
stopped producing the film in 2009.

“Everyone in the 20th century has been familiar with the Kodak name and its products,” said
Burley of Ryerson’s School of Image Arts. “We’ve not only used them to memorialize our
families and their histories, but also for diagnostics in hospitals, producing books and
newspapers and police investigative work. And then the whole world of Hollywood is based
around Kodak products.” The company also invented the first digital camera in 1975, which
it shelved because it would threaten its lucrative film business, Perez said in an interview in
March. “Like many other companies on the East Coast, Kodak has been phenomenal in
research and patents and not so good commercializing things, actually terrible
commercializing things,” Perez said.

The following financial statements were extracted from Kodak’s 2011 annual report:-
Year Year Year
EASTMAN KODAK 2011 2010 2009

Net sales      
    Products 5,113 5,485 6,326
    Services 781 778 788
    Licensing & royalties 128 904 495
Total net sales 6,022 7,167 7,609
Cost of sales      
    Products 4,534 4,618 5,247
    Services 601 603 603
Total cost of sales 5,135 5,221 5,850
   Gross profit 887 1,946 1,759
Selling, general and administrative expenses 1,159 1,275 1,298
Research and development costs 274 318 351
Restructuring costs, rationalization and other 121 70 226
Other operating (income) expenses, net -67 619 -88
Loss from continuing operations before -600 -336 -28
interest expense, other income (charges), net and

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 income taxes
Interest expense 156 149 119
Loss on early extinguishment of debt, net - 102 -
Other income (charges), net -2 26 30
Loss from continuing operations before income taxes -758 -561 -117
Provision for income taxes 9 114 115
Loss from continuing operations -767 -675 -232
Earnings (loss) from discontinued operations, net of
income taxes 3 -12 17
Extraordinary item, net of tax - - 6
NET LOSS -764 -687 -209
  Less: Net earnings attributable to noncontrolling
interests - - -1
NET LOSS ATTRIBUTABLE TO
EASTMAN KODAK -764 -687 -210
       
Year Year
Selected cash flow items:- 2011 2010
     Net cash used in operating activities -998 -219
     Net cash used in investing activities -25 -112
     Net cash provided by (used in) financing activities 246 -74
Effect of exchange rate changes on cash 14 5
Net decrease in cash and cash equivalents -763 -400
Cash and cash equivalents, beginning of year 1624 2024
Cash and cash equivalents, end of year 861 1624

EASTMAN KODAK (Balance Sheet) 2011 2010

ASSETS    
Cash and cash equivalents 861 1,624
Receivables, net 1,103 1,196
Inventories, net 607 746
Deferred income taxes 58 120
Other current assets 74 100
  Total current assets 2,703 3,786
     
Property, plant and equipment, net 895 1,037
Goodwill 277 294
Other long-term assets 803 1,109
  TOTAL ASSETS 4,678 6,226
LIABILITIES AND EQUITY    
CURRENT LIABILITIES    
Accounts payable, trade 706 959
Short-term borrowings and current portion of long-term debt 152 50
Accrued income taxes 40 343

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 Other current liabilities 1,252 1,468
  Total current liabilities 2,150 2,820
     
Long-term debt, net of current portion 1,363 1,195
Pension and other postretirement liabilities 3,053 2,661
Other long-term liabilities 462 625
  Total liabilities 7,028 7,301
     
EQUITY (DEFICIT)    
Common stock 978 978
Additional paid in capital 1,108 1,105
Retained earnings 4,071 4,969
Accumulated other comprehensive loss -2,666 -2,135
  3,491 4,917
Treasury stock, at cost; 119,912,877 shares as of December 31,
2011 and 122,393,782 shares as of
December 31, 2010 -5,843 -5,994
 Total Eastman Kodak Company shareholders’ (deficit) equity -2,352 -1,077
Noncontrolling interests 2 2
  Total (deficit) equity -2,350 -1,075
 TOTAL LIABILITIES AND EQUITY (DEFICIT) 4,678 6,226

Required
Part A
Compute the following financial ratios for year 2010 and year 2011:
i) Gross profit margin
ii) Net profit margin
iii) Return on assets
iv) Return on equity
v) Current ratio
vi) Quick ratio
vii) Days in inventory
viii) Days in receivables
ix) Days in payables
x) Cash conversion cycle
xi) Cash flow to net income ratio
xii) Asset turnover
xiii) Liabilities to assets ratio

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 xiv) Debt-to-equity ratio
You should clearly define the above financial ratios and show your workings. Ensure that you
are consistent in defining and calculating the above financial ratios for both years.

Part B
Based on your computations and analyses in part A, comment on the financial performance
of the company in terms of profitability, liquidity, cash flow generation, working capital
efficiency and solvency risk.

Question 4
Refer to the Pepsi Co’s 2019 annual report.
https://www.pepsico.com/docs/album/annual-reports/pepsico-inc-2019-annual-report.pdf?
sfvrsn=ea470b5_2

Examine the
i) Consolidated Statement of Income (ignore the statement of comprehensive
income)
ii) Consolidated statement of cash flow
iii) Consolidated Balance Sheet
Part A
Compute the following financial ratios for year 2018 and year 2019:
a. Gross profit margin
b. Net profit margin
c. Return on assets
d. Return on equity
e. Current ratio
f. Quick ratio
g. Days in inventory
h. Days in receivables
i. Days in payables
j. Cash conversion cycle
k. Asset turnover
l. Liabilities to assets ratio
m. Debt-to-equity ratio

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 n. Interest coverage ratio
You should clearly define the above financial ratios and show your workings. Ensure that you
are consistent in defining and calculating the above financial ratios for both years.

Part B
Based on your computations and analyses in part A, comment on the financial performance
of the company in terms of profitability, liquidity, cash flow generation (including a brief
review of its consolidated statement of cash flow), working capital efficiency and solvency
risk.

Part C
Perform DuPont analysis of the company’s Return on Equity (ROE) in both 2018 and 2019.
What are the key learning points?
The formula for the DuPont analysis is:-
ROE = profit margin x asset turnover x equity multiplier

This formula, in turn, can be broken down further to:

ROE = (net income / sales) x ( sales / total assets) x (total assets / shareholder equity)

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Project #5 – Cost, Volume, Profit (CVP) Analysis and Incremental Analysis

Question 1
WHBC Problem 20.6 A on page 919.

Question 2
WHBC Case 20-2 on page 925.

Question 3
WHBC Problem 21.1A on page 944.

Question 4
WHBC Problem 21.3A on page 945.

Question 5
WHBC Problem 21.4A on page 946.

Question 6
WHBC Problem 21.6A on page 946.

Question 7
WHBC Problem 21.7A on page 947.

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Project # 6 - Job order, Activity-based Costing, Costing and Value Chain.

Question 1
WHBC Problem 17.8A on page 804. ABC versus use of a single activity base.

Question 2
WHBC Case 17.1 on page 810. Effect of overhead application on performance evaluation.

Question 3
WHBC Problem 19.2A on page 878. Activity based management and target costing.

Question 4
WHBC Problem 19.3A on page 878. Target costing.

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Project #7 Budgeting and Standard Cost Systems

Question 1
WHBC Problem 22.8A on page 993. Transfer pricing decisions.

Question 2
WHBC Problem 23.8A on page 1,037. Flexible budgeting.

Question 3
WHBC Problem 24.7A on page 1,075. Computing, journalizing and analyzing cost variances.

Question 4
WHBC Case 24.2 on page 1,084. Determination and use of standard costs.

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Project # 8 – ROI, RI, EVA, Rewarding Business Performance.

Question 1
WHBC Problem 25.1A on page 1,111. Empire Hotel.

Question 2
Review the proxy statements of Exxon Mobil:-
https://corporate.exxonmobil.com/-/media/Global/Files/investor-relations/annual-meeting-
materials/proxy-materials/2020-Proxy-Statement.pdf

Required: How does the company set the compensation of its top management team?
Your response (maximum 2 pages) should address these issues:-
a) How does the company use the key concepts in balanced score card to determine
compensation of its top executives such as CEO?
b) What is the role of non-financial performance indicators in the design of the
compensation contracts of the top management?
c) Do you think that the compensation contract is properly designed to increase to
improve the performance of the company?
Note: Do not regurgitate material in textbook and lecture slides. Apply what you have learnt
in the context of this company.

Question 3
WHBC Case 25.1 on page 1,119. Business performance and transfer prices.

Question 4
WHBC Case 25.2 on page 1,119. Expansion of Big Bertha Sub.

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