Analyzing Equity Method Refer to Note 6 from the Year 4 Carb O' Nation (the Company)...
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Analyzing Equity Method Refer to Note 6 from the Year 4 Carb O' Nation (the Company) annual report provided below and answer the questions that follow. NOTE 6: EQUITY METHOD INVESTMENTS Our consolidated net income includes our Company's proportionate share of the net income or loss of our equity method investees. When we record our proportionate share of net income, it increases equity income (loss)-net in our consolidated statements of income and our carrying value in that investment. Conversely, when we record our proportionate share of a net loss, it decreases equity income (loss)-net in our consolidated statements of income and our carrying value in that investment. The Company's proportionate share of the net income or loss of our equity method investees includes significant operating and nonoperating items recorded by our equity method investees. These items can have a significant impact on the amount of equity income (loss)-net in our consolidated statements of income and our carrying value in those investments. The carrying values of our equity method investments are also impacted by our proportionate share of items impacting the equity investee's AOCI. We eliminate from our financial results all significant intercompany transactions, including the intercompany portion of transactions with equity method investees. The Company's equity method investments include our ownership interests in Carb O' Nation Mexico, Carb O' Nation Greece and Carb O' Nation Australia As of December 31, Year 4, we owned 28 percent, 23 percent and 29 percent, respectively, of these companies' outstanding shares. As of December 31, Year 4, our investment in our equity method investees in the aggregate exceeded our proportionate share of the net assets of these equity method investees by $1,671 million. This difference is not amortized. A summary of financial information for our equity method investees in the aggregate is as follows (in millions): For Year Ended December 31 Net operating revenues Cost of goods sold Gross profit Operating income Consolidated net income Less: Net income attributable to noncontrolling interests Net income attributable to common shareowners Equity income (loss)- net Year 4 Year 3 Year 2 $47,364 $47,734 $42,378 28,629 29,139 25,939 $18,735 $18,595 $16,439 $4,040 $3,942 $4,145 $2,196 $2,128 67 56 $2,694 80 $2,129 $2,072 $2,614 $692 $542 $737 At December 31 Year 4 Year 3 Current assets $14,566 $17,306 Noncurrent assets 36,072 36,384 Total assets Current liabilities $50,638 $53,690 $11,229 $12,947 Noncurrent liabilities Total liabilities 14,991 16,001 $26,220 $28,948 Equity attributable to shareowners of investees $23,727 $24,001 Equity attributable to noncontrolling interests Total equity Company equity investment 690 741 $24,417 $24,742 $8,952 $9,354 Net sales to equity method investees, the majority of which are located outside the United States, were $10,063 million, $9,178 million, and $7,082 million in Year 4, Year 3, and Year 2, respectively. Total payments, primarily marketing, made to equity method investees were $1,605 million, $1,807 million, and $1,587 million in Year 4, Year 3, and Year 2, respectively. In addition, purchases of finished products from equity method investees were $381 million, $415 million, and $392 million in Year 4, Year 3, and Year 2, respectively. If valued at the December 31, Year 4, quoted closing prices of shares actively traded on stock markets, the value of our equity method investments in publicly traded bottlers would have exceeded our carrying value by $4,899 million. Total net receivables due from equity method investees were $1,448 million and $1,308 million as of December 31, Year 4 and Year 3, respectively. The total amount of dividends received from equity method investees was $398 million, $401 million, and $393 million for the years ended December 31, Year 4, Year 3, and Year 2, respectively. Dividends received included a $35 million special dividend from Carb O' Nation Greece during Year 2. We classified the receipt of the special dividend in cash flows from operating activities because our cumulative equity in earnings from Carb O' Nation Greece exceeded the cumulative distributions received; therefore, the dividends were deemed to be a return on our investment and not a return of our investment. Required a. Does Carb O' Nation have investments in affiliated companies for which it accounts using the equity method? What is the percentage ownership of each investee? Company Name Carb O' Nation Mexico Carb O' Nation Greece Carb O' Nation Australia Percentage Ownership 28% 23% 29% -> Analyzing Equity Method Refer to Note 6 from the Year 4 Carb O' Nation (the Company) annual report provided below and answer the questions that follow. NOTE 6: EQUITY METHOD INVESTMENTS Our consolidated net income includes our Company's proportionate share of the net income or loss of our equity method investees. When we record our proportionate share of net income, it increases equity income (loss)-net in our consolidated statements of income and our carrying value in that investment. Conversely, when we record our proportionate share of a net loss, it decreases equity income (loss)-net in our consolidated statements of income and our carrying value in that investment. The Company's proportionate share of the net income or loss of our equity method investees includes significant operating and nonoperating items recorded by our equity method investees. These items can have a significant impact on the amount of equity income (loss)-net in our consolidated statements of income and our carrying value in those investments. The carrying values of our equity method investments are also impacted by our proportionate share of items impacting the equity investee's AOCI. We eliminate from our financial results all significant intercompany transactions, including the intercompany portion of transactions with equity method investees. The Company's equity method investments include our ownership interests in Carb O' Nation Mexico, Carb O' Nation Greece and Carb O' Nation Australia As of December 31, Year 4, we owned 28 percent, 23 percent and 29 percent, respectively, of these companies' outstanding shares. As of December 31, Year 4, our investment in our equity method investees in the aggregate exceeded our proportionate share of the net assets of these equity method investees by $1,671 million. This difference is not amortized. A summary of financial information for our equity method investees in the aggregate is as follows (in millions): For Year Ended December 31 Net operating revenues Cost of goods sold Gross profit Operating income Consolidated net income Less: Net income attributable to noncontrolling interests Net income attributable to common shareowners Equity income (loss)- net Year 4 Year 3 Year 2 $47,364 $47,734 $42,378 28,629 29,139 25,939 $18,735 $18,595 $16,439 $4,040 $3,942 $4,145 $2,196 $2,128 67 56 $2,694 80 $2,129 $2,072 $2,614 $692 $542 $737 At December 31 Year 4 Year 3 Current assets $14,566 $17,306 Noncurrent assets 36,072 36,384 Total assets Current liabilities $50,638 $53,690 $11,229 $12,947 Noncurrent liabilities Total liabilities 14,991 16,001 $26,220 $28,948 Equity attributable to shareowners of investees $23,727 $24,001 Equity attributable to noncontrolling interests Total equity Company equity investment 690 741 $24,417 $24,742 $8,952 $9,354 Net sales to equity method investees, the majority of which are located outside the United States, were $10,063 million, $9,178 million, and $7,082 million in Year 4, Year 3, and Year 2, respectively. Total payments, primarily marketing, made to equity method investees were $1,605 million, $1,807 million, and $1,587 million in Year 4, Year 3, and Year 2, respectively. In addition, purchases of finished products from equity method investees were $381 million, $415 million, and $392 million in Year 4, Year 3, and Year 2, respectively. If valued at the December 31, Year 4, quoted closing prices of shares actively traded on stock markets, the value of our equity method investments in publicly traded bottlers would have exceeded our carrying value by $4,899 million. Total net receivables due from equity method investees were $1,448 million and $1,308 million as of December 31, Year 4 and Year 3, respectively. The total amount of dividends received from equity method investees was $398 million, $401 million, and $393 million for the years ended December 31, Year 4, Year 3, and Year 2, respectively. Dividends received included a $35 million special dividend from Carb O' Nation Greece during Year 2. We classified the receipt of the special dividend in cash flows from operating activities because our cumulative equity in earnings from Carb O' Nation Greece exceeded the cumulative distributions received; therefore, the dividends were deemed to be a return on our investment and not a return of our investment. Required a. Does Carb O' Nation have investments in affiliated companies for which it accounts using the equity method? What is the percentage ownership of each investee? Company Name Carb O' Nation Mexico Carb O' Nation Greece Carb O' Nation Australia Percentage Ownership 28% 23% 29% ->
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Accounting Principles Volume 2
ISBN: 9781119786634
9th Canadian Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
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