Reference no: EM132317921

Part A: Inventory - Kimberly-Clark

See the attached 2007 financial statements (and footnotes) for Kimberly-Clark (KC). Identify the notes that relate to Inventory (notes 1 and 18). For simplicity, assume that all inventories that are described as 'The Lower of cost on the FIFO Method, weighted average cost method or market' are on the FIFO basis.

All figures in millions as per accounts.

1. What was the cost of goods sold in 2007?

2. KC uses multiple cost flow assumptions to value its inventories. What are these cost flow assumptions?

3. What percentage of the book value of inventories at the end of 2007 was valued on a FIFO basis?

4. Estimate the cost of goods finished in 2007. Ignore the LIFO reserve, that is, use the inventory value for finished goods as it is reported in the footnote at the beginning and the end of the year.

5. Again, ignoring the LIFO reserve and using your answer to Question 4, estimate the total of additions to the work in process inventory account in 2007.

6. Ignoring the LIFO reserve and assuming KC purchased raw materials and supplies costing $4,500 million in 2007, estimate:

(i) The cost of raw materials and supplies transferred to production departments in 2007;

(ii) Payments to suppliers in 2007, assuming all Accounts Payable relate to inventory purchases.

Hint: combine "raw materials" and "supplies and others" and treat it as one account.

7. If KC had used FIFO to value all its inventories (instead of a mix of LIFO and FIFO), what would have been the value of total inventories at the end of 2007?

8. Estimate COGS in 2007 if KC had used FIFO to value all its inventories.

9. Assuming a 35% tax rate, estimate KC's net income in 2007 had it used FIFO to value all its inventories. Is this income number higher or lower than under LIFO? Comment.

10. Assuming a 35% tax rate, estimate the amount of income taxes deferred (postponed) by the use of LIFO.

11. For KC, the impact on inventory and COGS from using LIFO vs. FIFO is not very large. When would you expect this choice to have a significant impact?

Part B: Accounts Receivable and Inventory - Diageo PLC

Refer to the extracted financial statement information for Diageo PLC for the fiscal year ended June 30, 2013.

1. Does Diageo PLC disclose its receivable balances on the balance sheet on a net or gross basis?

2. As at June 30, 2013, what was the total amount due, within the next 12 months, to Diageo PLC from all of its trade debtors (including other receivables)?

3. As at June 30, 2013, what percentage of outstanding trade debtors (including other receivables), who are expected to pay within the next 12 months, does Diageo PLC not expect to collect?

4. What was the bad debt expense recorded by Diageo PLC for the fiscal year ended June 30, 2013?

5. What was net sales for Diageo PLC for the fiscal year ended June 30, 2013?

6. Assume that all net sales relate to Diageo PLC core product and all such sales are initially made via credit. What amount of cash was collected by Diageo PLC from its customers during the fiscal year ended June 30, 2013? Please use the statement of cash flow method discussed in class to answer this question.

7. Does Diageo PLC make any provisions related to its inventory?

8. Were there any new provisions created for inventory by Diageo PLC for the fiscal year ended June 30, 2013? If so, what was the amount of that new provision?

9. What fraction of the total inventory balance of Diageo PLC as at June 30, 2013 relates to finished goods (use net inventory, not gross inventory)?

Attachment:- Assignment Files.rar