Case 11-2 Amerbran Company (A) Amerbran Company was a diversified company that sold various consumer products, including food, tobacco, distilled products, and personal care products and financial services. Financial statements for the company are shown in Exhibit 1. EXHIBIT 1 AMERBRAN COMPANY Balance Sheets As of December 31 (In thousands) 20x120x0 Assets $ 28,912$ 23,952 Accounts receivable 756,152 687,325 Inventories 1,244,912 1,225,402
Prepaid expenses 76,140 77,167 Total current assets 2,106,116 2,013,846 Investments 1,116,534 1,058,637 Property, plant, and equipment, at cost 1,566,268 1,366,719 Less accumulated depreciation 723,442 645,734 Goodwill 645,210 577,606 Other assets 115,826 62,374
Total assets$4,826,512$4,433,448 Liabilities and shareholder’s Equity Accounts payable$ 271,452$ 238,377 Short-term debt 430,776 351,112 Accrued expenses payable 922,990 728,262 Total current liabilities 1,625,218 1,317,751 Long term liabilities 880,674 932,828
Total liabilities 2,505,892 2,250,579 Convertible preferred stock 33,828 42,611 Common stock at par 322,834 161,417 Additional paid in capital 53,641 57,072 Treasury stock at cost (110,948) (102,705) Retained earnings 2,021,265 2,024,474 Total shareholders’ equity 2,320,620 2,182,869 Total liabilities and shareholders’ Equity $4,826,512 $4,433,448 Income statement For the year ended December 31, 20×1 (in thousands) Sales revenues, net$ 7,622,677 Cost of sales 2,803,623 Excise taxes on goods sold 2,887,616 Gross margin 1,931,438
Selling, general and administrative expenses 1,328,107 Income before income taxes 603,331 Provision for income taxes 274,558 Net Income $ 328,773 The 20×1 financial statements reflect the following transactions (dollar amounts are in thousands): 1. Depreciation and amortization expense was $115,974. 2. Net income included a loss of some obsolete equipment. The equipment had not yet been disposed of. 3. Net income included $59,610 from Amerbran’s investment in a subsidiary; none of this income had been received in cash. 4.
The year-end balance in Deferred Income Taxes was $17,548 lower than it was at the start of the year. 5. New property, plant and equipment purchases totaled $260,075, all paid for with cash. Disposals of fixed assets generated $33,162 cash proceeds. 6. Acquisition of another company that was made for cash resulted in additional depreciable assets of $31,691 and goodwill of $102,030. 7. Cash dividends were paid in the amount of $216,158. 8. The firm declared and issued a 100 percent common stock dividend effective September 10,20×1; that is each shareholder received as a dividend a number of shares equal to his or her holdings prior to the dividend.
The newly issued shares were valued at par in recording this transaction. 9. The firm spent $30,609 to purchase treasury stock on the open market. Some of the shares so acquired were reissued to certain employees as a bonus. 10. The firm increased its short-term debt as indicated on the balance sheet in Exhibit 1. Long –term borrowings decreased by $34,606. Questions Prepare a statement of cash flows for the year 20×1. In order for your statement to show the correct increase in cash ($4,960), you will need to add a “miscellaneous activities” category, this will capture several transactions that were not described because they are more complicated than those covered in the text.
