Decision Case 3.

1)

Kellogg’ General
  s Mills
Largest
Expense COGS COGS
  7108 8922.9

If we compare the COGS and General, Administrative, and Selling Expenses, COGS is thrice
that of others and it proves to be a significant expense for both companies.

2)

Selling, Selling,
General and General and Comparison
Administrative Ratio Administrative Ratio based on
Company Expense (SGA/Net Expense (SGA/Net both the
Name (2009) Sales) (2010) Sales) years
General Ratio
Mills 2951.8 0.200921634 3236.1 0.218707 increased

Ratio
Kellogg’s 3390 0.269582505 3299 0.266113 decreased
 3)

Compariso
Incom Ratio to Incom n based on
Compan e Tax Income e Tax both the
y Name (2009) Tax (2010) Ratio years

Around 6
% increase
for
General 0.3498298 0.3709195 General
Mills 771.2 9 720.4 8 Mills

Almost 2 %
decrease
0.2881745 0.2826603 for
Kellogg’s 502 1 476 3 Kellogg’s

In 2009 General Mills has the highest ratio and in 2010 General Mills has the highest
ratio.

Decision Case 3 .2

1)

From Cash Flow Statement Debit Credit

Land, buildings, and equipment 649.9  
Cash   649.9

2)

From Cash Flow Debit Credit

Long Term Debt 906.9  
Cash   906.9

Decision Case 4.1

1) Revenue recognition is based on when the delivery is accepted by the customer and
bills are sent to customers and the customer can actually return the products to the
company only on prior approval.
No there is no difference in the companies' revenue recognition policies.
 2)

 Total
Current
Assets
Account compose
s d of
receivab receivabl
  le es is
Kellogg’s 1190 40.82333
General
Mills 1041.6 29.93103

Kellogg’s has a greater percentage of accounts receivables.

Decision Case 5.1

1)

Kellogg’s and General Mills are manufacturers.

2)

Percentag
e of Total
Inventories Assets
Kellogg’s 1056 10.04474
General Mills 1344 7.602283

3)

The advantage to Kellogg’s is that they use the weighted average method and using this method
brings in higher profits than LIFO and lower than FIFO.

4)

In General Mills outside the USA, they use LIFO so lower income and higher expense so they
have to pay less tax. But inside the USA they use FIFO which shows a higher income and less
expense and they eventually have to pay high taxes.

5)

Both Kellogg’s and General Mills have perishable goods that have an expiry date so both
companies need to have a perpetual inventory system so that they can keep the balance of the
inventory in smooth way.