Question: Ganton follows a policy of holding less than a 50

Ganton follows a policy of holding less than a 50% ownership interest in the corporations that bottle its beverages. Exhibit 14.17 presents selected balance sheet data for Ganton and for its bottling affiliates on December 31, 2013. The first column shows amounts for Ganton as reported, with Ganton using the equity method to account for investments in its bottlers. The second column shows amounts for Ganton’s bottlers as reflected in a note to Ganton’s financial statements. Ganton’s investment in its bottlers exceeds its share of the carrying value of its share of the net assets of these bottlers by $785 million on December 31, 2013.

a. Suggest reasons why the amount for other noncurrent assets in the consolidated column exceeds the sum of the amounts for noncurrent assets on the accounting records of Ganton and of its bottling affiliates.
b. Compute the liabilities-to-assets ratio and the debt-equity ratio for Ganton assuming Ganton (1) accounts for its investments using the equity method, and (2) consolidates its bottlers.
c. Suggest reasons why Ganton might choose to own less than 50% of itsbottlers.

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  • CreatedMarch 04, 2014
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