See attached--Principles of Accounting I
Instructions Overview As an analyst for a large U.S. multinational corporation, you are assigned to examine a possible acquisition candidate, completing an initial search and review. Your supervisor is a member of the Controller's team. The Controller reports directly to the Chief Financial Officer (CFO). Your work may be presented to a variety of audiences, so professionalism is essential in all deliverables you create. 1. Select a company that is publicly traded. 2. It must have an Accounts Receivable and Inventory Account. It is recommended you select a manufacturing company. 3. You must research and secure the SEC 10-K Annual Report for the most recent year. This is often available at the company web site. Search for "Investor Information" or "Company Information" and "SEC Filing." 4. Use this company in the Discussion postings throughout the semester. The discussion questions will help you build content for your report and presentation. Report Requirements Report Content 5. Post the name of your company in the SEC 10-K company for your instructor's approval in the SEC Project: Request a Corporation to Study (REQUIRED posting)/ All parts of the discussion must be answered in your post. 6. Each student must select a different company, so read the company names selected by classmates. Also, your selected company must be ranked 500 or higher on the Fortune 500 list of industrial companies. 7. Your report should comment on the financial statements for your company as they relate to the information presented through materials for this class, including the notes to the financial statements. Report Layout 8. Write a 2- to 3-page ( a full-page typically has at least 300 words) report, single-spaced, one-inch margins, 12-point font, with a double space between paragraphs. 9. Please keep your report to no more than 3 pages. 10. Page count does not include a title page, tables and exhibits, table of contents, and reference list. 11. Include a title page (include your name on the title page). Use headings in your reports such as Accounts Receivable and Inventory (topics from the textbook); other examples would be Balance Sheet and Income Statement. 12. Include a brief introduction of your company as well as a conclusion/summary at the end. The bulk of your report should cover the accounting topics in 1-8, 10-12, 14 Chapters (www.principlesofaccounting.com) 13. You will also be required to include the Income Statement and Balance Sheet as an attachment to your report. You can cut and paste directly from the SEC 10-K Report. These are considered attachments and are not part of the required page count for the report. 14. APA style is required for citations and a reference list. Include in-text citations. The reference list is the most important. 15. Your report should use one-inch margins on the left, right, top, and bottom of each page and font set at 12 points. https://www.sec.gov/ix?doc=/Archives/edgar/data/40704/000119312520186469/d89717d10k.htm Home - principlesofaccounting.com General Mills, Inc. (GIS) Company Profile, News, Rankings | Fortune | Fortune My reports for General Mills SEC 10-k Report 1: SEC 10-K Financial Statements What is the Description and Dollar Value of the first line on the Income Statement (it may be net sales)? The description of the first line on the Income Statement is Net sales and dollar value is $17,626.6 million. Locate the Balance Sheet Balance Sheet is located on the page 58. What are the names of the assets and their values (if more than five line items, report only the first five line items and dollar values)? Cash and cash equivalents - $1,677.8 million Receivables - $1,615.1 million Inventories - $1,426.3 million Prepaid expenses and other current assets - $402.1 million Land, buildings, and equipment - $3,580.6 million Statement of Owner’s Equity: Post the line items and dollar values in the "Equity" section of the balance sheet. You will likely find line items including Common Stock, Retained Earnings (or Deficit), and Treasury Stock. Common stock, 754.6 million shares issued, $0.10 par value - $75.5 million Additional paid-in capital - $1,348.6 million Retained earnings - $15,982.1 million Common stock in treasury, at cost, shares of 144.8 million and 152.7 million – ($6,433.3 million) Accumulated other comprehensive loss – ($2,914.4 million) Noncontrolling interests - $291.0 million What is the Net Income (or Net Loss) for your SEC 10-K company? Net income for General Mills is $2,181.2 million Report 2: SEC 10-K Income Statement The fiscal year of General Mills ends on the last Sunday of May. The inventories in the United States are described using LIFO method. The inventories outside the United States are described using FIFO or not-realizable value method. Inventories All inventories in the United States other than grain are valued at the lower of cost, using the last-in, first-out (LIFO) method, or market. Grain inventories are valued at net realizable value, and all related cash contracts and derivatives are valued at fair value, with all net changes in value recorded in earnings currently. Inventories outside of the United States are generally valued at the lower of cost, using the first-in, first-out (FIFO) method, or net realizable value. Shipping costs associated with the distribution of finished product to our customers are recorded as cost of sales, and are recognized when the related finished product is shipped to and accepted by the customer. Income Statement: Multi-step income statement Calculate the Gross Profit and the Gross Profit Percentage for this year and last year, creating a small table, such as the following: This Year Last Year Net Sales $17,626.6 $16,865.2 Cost of Goods Sold 11,496.7 11,108.4 Gross Profit 6,129.9 5.756.8 Gross Profit Percentage 35% 34% In the example above, sales increased, gross profit increased, and the gross profit percentage increased. Therefore, sales are more profitable. General Mills made 35 cents of gross profit on every dollar of sales this year, but only 34 cents of gross profit on every dollar of sales last year. Sales increased, and they are actually generating more profit overall, both as an absolute dollar value and as a percentage. Report 3: SEC 10-K Internal Control What is the name of the auditor? KPMG LLP Looking at their signature, what city do you see? Minneapolis, Minnesota The first page of the SEC 10-K is very standard and lists two key locations. Using this information, post the state of incorporation and the city and state of the corporate headquarters for your SEC 10-K. The state of incorporation is Delaware and the city and state of the corporate headquarters is Minneapolis, Minnesota. Returning to Item 8, near the auditor's report (this is the letter they sign, giving their opinion on whether the financial statements are fairly presented in adherence with U.S. GAAP), locate the letter regarding internal control. This letter is signed by the company's management. What are their names and titles? Some companies list all officers whereas others list only the chief executive officer (CEO) and the chief financial officer (CFO). The SEC only requires the signatures of the CEO and CFO. J. L. Harmening (Chief Executive Officer) and K. A. Bruce (Chief Financial Officer) Report 4: SEC 10-K Receivables and Fixed Assets Reading the notes to the financial statements, as well as the balance sheet, post information about the Accounts Receivable for your company. Who owes the company money? It is possible that your selected company does not report accounts receivable as a separate line item because the company does not generally sell on credit terms. Accounts Receivable was $1,615.1 million for May 31, 2020. The accounts receivable for the previous year for May 26, 2019 was $$1,679.7 million. The company is owed the money by various customers. Search for the phrase "Bad Debts" or Allowance (for collectible accounts). When you read the balance sheet, you may see that the receivables are listed as a net of $X,XXX to show the Allowance for Bad Debts. Comment about the changes in Accounts Receivable and the Allowance for Bad Debts. Are they increasing or decreasing? How does this relate to sales (are sales increasing or decreasing)? In $ millions 2020 2019 Gross Receivables 1,648.3 1,708.5 Allowance for doubtful accounts 33.2 28.8 Net Receivables 1,615.1 1,679.7 Net Sales 17,626.6 16,865.2 Allowance for doubtful debt as % of gross receivables 2.06% 1.715% Net Receivables as % of net sales 9.16% 9.96% Net account receivables decreased compared to the previous financial year. Allowance for doubtful accounts increased by $4.4 million by almost 15.3% compared to the year 2019. The company estimated that its debtors may not be able to pay the amounts outstanding and decided to make a larger provision for these doubtful accounts. During the same period, the net sales for the company increased from $16,865.2 million in the year 2019 to $17,626.6 million in the year 2020. General Mills may have decided to improve its earnings quality by ensuring it does not do sales to customers who may not be able to pay their dues and also making a larger for the outstanding receivables. This can be seen by the improvement of net receivables as a percentage of net sales. Except this, COVID-19 already has an influence on the company’s financials and it will influence the company in the future due to changes in consumptions, government restrictions, etc. Property, Plants, and Equipment / PPE (Capital Assets; Fixed Assets): Comment about PPE and accumulated depreciation. How are these values changing from year to year: PPE, Accumulated Depreciation, and Net PPE? In $ millions 2020 2019 Change % Gross PPE 9,954.8 10,080.5 -1.25 Accumulated Depreciation 6,374.2 6,293.3 1.29 Net PPE 3,580.2 3,787.2 -5.47 Gross PPE (Total land, buildings, and equipment) decreased by 1.25%. Net PPE decreased by 5.47% while the accumulated depreciation increased by 1.29%.