Refer to the annual report of Campbell Soup in Appendix A.

Required:

a. Examine Campbell Soup’s pension liabilities using its note 8. What are the reported amounts from its balance sheet and income statement that relate to its pension plans in Year 11?

b. Determine the economic position of the pension plan for Year 11. Restate the balance sheet accordingly and examine the effect of the adjusted position on the total liabilities to equity ratio.

c. What is the true economic pension cost for Year 11? Reconcile it with the reported pension expense. Determine the pension expense you would consider when determining Campbell’s permanent income.

Campbell Soup Annual Report:

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(dollars in millions) Net revenue.... Gross margin. % of net revenue. Operating expenses. % of net revenue. Operating income. % of net revenue.. Tax provision before repatriation charge.. % of income before income taxes. Tax repatriation charge...... % of Income before income taxes. Income tax provision. % of Income before income taxes. Net income.. % of net revenue. FISCAL YEAR ENDED January 28, Percentage January 30, Percentage January 31, 2005 Change 2004 Change 2003 $49,205 $ 9,015 18.3% $4,761 9.7% $ 4,254 8.6% $1,122 25.2% $ 280 6.3% $1,402 31.5% $ 3,043 6.2% 19% 19% 19% 20% 15% $41,444 $ 7,552 18.2% $ 4,008 9.7% $ 3,544 $ 8.6% $ 1,079 29.0% $ 1,079 29.0% $ 2,645 6.4% 17% 19% 14% 25% 25% $35,404 $ 6,349 17.9% $ 3,505 9.9% $ 2,844 8.0% $ 905 29.9% $ 905 29.9% $ 2,122 6.0%