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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

(Ratio Computations and Additional Analysis) Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2018, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two \(35,000 notes, which are due on June 30, 2018, and September 30, 2018. Another note of \)6,000 is due on March 31, 2019, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn’s cash flow problems are due primarily to the company’s desire to finance a \(300,000 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years

BRADBURN CORPORATION

BALANCE SHEET

MARCH 31

Assets

2018

2017

Cash

\) 18,200

\( 12,500

Notes receivable

148,000

132,000

Accounts receivable (net)

131,800

125,500

Inventories (at cost)

105,000

50,000

Plant & Equipment (net of depreciation)

1,449,000

1,420,500

Total assets

\)1,852,000

\(1,740,500

Liabilities and Stockholders’ Equity

Accounts payable

\) 79,000

\( 91,000

Notes payable

76,000

61,500

Accrued liabilities

9,000

6,000

Common stock (130,000 shares, \)10 par)

1,300,000

1,300,000

Retained earnings*

388,000

282,000

Total liabilities and stockholders’ equity

\(1,852,000

\)1,740,500

*Cash dividends were paid at the rate of \(1 per share in the fiscal year 2017 and \)2 per share in the fiscal year 2018.

BRADBURN CORPORATION

INCOME STATEMENT

FOR THE FISCAL YEARS ENDED MARCH 31

2018

2017

Sales revenue

\(3,000,000

\)2,700,000

Cost of goods sold*

1,530,000

1,425,000

Gross margin

1,470,000

1,275,000

Operating expenses

860,000

780,000

Income before income taxes

610,000

495,000

Income taxes (40%)

244,000

198,000

Net income

\( 366,000

\) 297,000

Depreciation charges on the plant and equipment of \(100,000 and \)102,500 for fiscal years ended March 31, 2017, and 2018, respectively, are included in the cost of goods sold.

Instructions

(a). Compute the following items for Bradburn Corporation.

  1. Acid-test (quick) ratio for fiscal years 2017 and 2018.

Snider Corporation, a publicly-traded company, is preparing the interim financial data which it will issue to its shareholders at the end of the first quarter of the 2017–2018 fiscal year. Snider’s financial accounting department has compiled the following summarized revenue and expense data for the first quarter of the year.

Sales revenue \(60,000,000

Cost of goods sold 36,000,000

Variable selling expenses 1,000,000

Fixed selling expenses 3,000,000

Included in the fixed selling expenses was the single lump-sum payment of \)2,000,000 for television advertisements for the entire year.

Instructions

b) What financial information, as a minimum, must Snider Corporation disclose to its shareholders in its quarterly reports?

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.

d) Gansner Company realized a large gain on the sale of investments at the beginning of the second quarter. The company wants to report one-third of the gain in each of the remaining quarters.

In calculating inventory turnover, why is cost of goods sold used as the numerator? As the inventory turnover increases, what increasing risk does the business assume?

Answer each of the questions in the following unrelated situations.

c) A company has current assets of \(90,000 (of which \)40,000 is inventory and prepaid items) and current liabilities of \(40,000. What is the current ratio? What is the acid-test ratio? If the company borrows \)15,000 cash from a bank on a 120-day loan, what will its current ratio be? What will the acid-test ratio be?

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