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Presented below is an excerpt from the financial statements of H. J. Heinz Company.

Segment and Geographic Data

The company is engaged principally in one line of business—processed food products—which represents over 90% of consolidated sales. Information about the business of the company by geographic area is presented in the table below

There were no material amounts of sales or transfers between geographic areas or between affiliates, and no material amounts of United States export sales.

Foreign

(In thousands of U.S.

dollars)

Domestic

United Kingdom

Canada

Western Europe

Other

Total

Worldwide

Sales

\(2,381,054

\)547,527

\(216,726

\)383,784

\(209,354

\)1,357,391

$3,738,445

Operating income

246,780

61,282

34,146

29,146

25,111

146,685

396,465

Identifiable assets

1362,152

265,218

112,620

294,732

143,971

816,541

2,178,693

Capital expenditures

72,712

12,262

13,790

8,253

4,368

38,673

111,385

Depreciation expense

42,279

8,364

3,592

6,355

3,606

21,917

64,196

Instructions

(a) Why does H. J. Heinz not prepare segment information on its products or services?

Short Answer

Expert verified

Segment reporting is not possible in one core product or service.

Step by step solution

01

Meaning of Segment reporting

Segment reporting is a method of representing financial statement items by segment. Section-by-section findings are displayed later. Annual financial statements, augmented with segment data from segment reporting, give a more detailed picture of a company's financial position, asset position, and profit position.

02

Explaining the reason for not preparing segment information

Since H.J. Some companies like Heinz only have one core product or service, it's hard to make fragmented data available in a meaningful way. The principal indicates that a certain segment controls 90% of the company's sales, profits, and identifiable assets. Although segmented figures are not given in this example, the industry-leading segment should be recognized.

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Most popular questions from this chapter

What are diversified companies? What accounting problems are related to diversified companies?

Jane Ellerby and Sam Callison are discussing the recent fraud that occurred at LowRental Leasing, Inc. The fraud involved the improper reporting of revenue to ensure that the company would have income in excess of $1 million. What is fraudulent financial reporting, and how does it differ from an embezzlement of company funds?

(Dividend Policy Analysis) Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend has never been declared. Presented below is a brief financial summary of Matheny Inc.’s operations.

(\(000 omitted)

2018

2017

2016

2015

2014

Sales revenue

\)20,000

\(16,000

\)14,000

\(6,000

\)4,000

Net income

2,400

14,000

800

700

250

Average total assets

22,000

19,000

11,500

4,200

3,000

Current assets

8,000

6,000

3,000

1,200

1,000

Working capital

3,600

3,200

1,200

500

400

Common shares:

Number of shares

Outstanding (000)

Average market price

2,000

\(9

2,000

\)6

2,000

$4

20

-

20

-

Instructions

  1. Suggest factors to be considered by the board of directors in establishing a dividend policy.

The following statement is an excerpt from the FASB pronouncement related to interim reporting. Interim financial information is essential to provide investors and others with timely information as to the progress of the enterprise. The usefulness of such information rests on the relationship that it has to the annual results of operations. Accordingly, the Board has concluded that each interim period should be viewed primarily as an integral part of an annual period. In general, the results for each interim period should be based on the accounting principles and practices used by an enterprise in the preparation of its latest annual financial statements unless a change in an accounting practice or policy has been adopted in the current year. The Board has concluded, however, that certain accounting principles and practices followed for annual reporting purposes may require modification at interim reporting dates so that the reported results for the interim period may better relate to the results of operations for the annual period.

Instructions

The following six independent cases present how accounting facts might be reported on an individual company’s interim financial reports. For each of these cases, state whether the method proposed to be used for interim reporting would be acceptable under generally accepted accounting principles applicable to interim financial data. Support each answer with a brief explanation.

e) Fredonia Company has estimated its annual audit fee. It plans to pro rate this expense equally over all four quarters.

(Dividend Policy Analysis) Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend has never been declared. Presented below is a brief financial summary of Matheny Inc.’s operations.

(\(000 omitted)

2018

2017

2016

2015

2014

Sales revenue

\)20,000

\(16,000

\)14,000

\(6,000

\)4,000

Net income

2,400

14,000

800

700

250

Average total assets

22,000

19,000

11,500

4,200

3,000

Current assets

8,000

6,000

3,000

1,200

1,000

Working capital

3,600

3,200

1,200

500

400

Common shares:

Number of shares

Outstanding (000)

Average market price

2,000

\(9

2,000

\)6

2,000

$4

20

-

20

-

Instructions

  1. Comment on the appropriateness of declaring a cash dividend at this time, using the ratios computed in part (b) as a major factor in your analysis.
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