Complete the following three deliverables for this assignment as a team:
1. The Financial Reporting, Procter & Gamble Company, p. 379.
2. The Financial Statement Analysis Cases, Case 1: Occidental Petroleum Corporation, p. 379.
3. Problem 7-6, p. 374
Compile all team member’s input.
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The Procter & Gamble Company (P&G)
The financial statements of P&G are presented in Appendix B. The company’s complete annual report, including the notes to the financial statements, is available online.
Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
(a) What criteria does P&G use to classify “Cash and cash equivalents” as reported in its balance sheet?
(b) As of June 30, 2014, what balances did P&G have in cash and cash equivalents? What were the major uses of cash during the year?
(c) P&G reports no allowance for doubtful accounts, suggesting that bad debt expense is not material for this company. Is it reasonable that a company like P&G would not have material bad debt expense? Explain.
P7-6 (LO2,3) (Journalize Various Accounts Receivable Transactions) The balance sheet of Starsky Company at December 31, 2016, includes the following.
Less: Allowance for doubtful accounts
Transactions in 2017 include the following.
1. Accounts receivable of $138,000 were collected including accounts of $60,000 on which 2% sales discounts were allowed.
2. $5,300 was received in payment of an account which was written off the books as worthless in 2016.
3. Customer accounts of $17,500 were written off during the year.
4. At year-end, Allowance for Doubtful Accounts was estimated to need a balance of $20,000. This estimate is based on an analysis of aged accounts receivable.
Financial Statement Analysis Cases
Case 1: Occidental Petroleum Corporation
Occidental Petroleum Corporation reported the following information in a recent annual report.
What items other than coin and currency may be included in “cash”?
(b) What items may be included in “cash equivalents”?
(c) What are compensating balance arrangements, and how should they be reported in financial statements?
(d) What are the possible differences between cash equivalents and short-term (temporary) investments?
(e) Assuming that the sale agreement meets the criteria for sale accounting, cash proceeds were $345 million, the carrying value of the receivables sold was $360 million, and the fair value of the recourse liability was $15 million, what was the effect on income from the sale of receivables?
(f) Briefly discuss the impact of the transaction in (e) on Occidental’s liquidity.