ACCY 500: Accounting Measurement, Reporting and

Control
Group Assignment 2
Group Name:
Student Names:

Part I: Accounts Receivable and Uncollectible Amounts

Using the balance sheet of Microsoft provided on the next page, answer the following
questions. Please note that Microsoft fiscal year ends on June 30.

1. As of June 30, 2020, how much does Microsoft expect to collect from its customers in the
future because of sales that were made prior to July 1, 2020?

32,011

2. Assume that Microsoft had written off $202 (million) of its accounts receivable as
permanently uncollectible during the year ended June 30, 2020. How much bad debt
expense did Microsoft record during fiscal year 2020?

Beginning Balance + Expected Bad Debt - Bad Debt Written off = Ending Balance.

Beginning Balance = -411,000

Expected Bad Debt= -579,000
Bad debt Written off= 202,000
Ending Balance= -788,000
MICROSOFT CORPORATION

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Part II: Accounts Receivables and Inventory
Please consider the Income Statement and Note 18 (Supplemental information) for General
Mills below and answer the following questions. Also, assume that revenue is presented
net of bad debt expense.

1. Assume that the Company charged $16 million as bad debt expense in 2020. Compute the
amount of bad debts written off in 2020.

Beginning Balance + Expected Bad Debt - Bad Debt Written off = Ending Balance.

Beginning Balance= -28.8

Expected Bad Debt= -16.0
Bad Debt Written off= 11.6
Ending Balance= -33.2

2. Compute the amount of cash collected from customers during the year ended May 31,
2020.

Gross Values: Cash collected = Sales - Change in A/R (add allowance back) - Write-offs +
Change in deferred revenue

(17,626.6+16)-(1648.3-1708.5)-11.6 = 17,691.2

3. What cost flow assumption(s) for inventories does General Mills use?

LIFO and FIFO

4. Suppose that General Mills had in all periods used FIFO as their cost flow assumption for
all their inventories. What would have been General Mills’ book value of inventories at
the end of fiscal year 2020 under this alternative cost flow assumption?

It would be higher by 202.1 and the net book value would be 1,628
(1426.10+202.10)

Excess of fifo over lifo

Inventory reserve + Inventory total

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5. What is the amount of inventory purchases in fiscal year 2020?

Ending Inventory = Beginning Inventory+ Inventory purchases – COGS – Inventory Write-

downs

Beginning Inventory= 1,559.30

Inventory Purchases =11,363.7
COGS= 11,496.70
Inventory Write Downs= 0
Ending Inventory=1,426.30

6. If General Mills had used FIFO as a cost flow assumption for all of their inventories,
recalculate the value of COGS on a FIFO basis in fiscal year 2020.

COGS FIFO= COGS LIFO – Change in LIFO reserve

COGS LIFO= 11,496.70

Change in LIFO= (213.5-202.10) = -11.4
COGS FIFO=11,508.1

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 NOTE 18. SUPPLEMENTAL INFORMATION
The components of certain Consolidated Balance Sheet accounts are as follows:

May 31, May 26,

In Millions 2020 2019
Receivables:
Customers $1,648.3 $1,708.5
Less allowance for doubtful
(33.2) (28.8)
accounts
Total $1,615.1 $1,679.7

May 31, May 26,

2020 2019
In Millions
Inventories:
Finished goods $1,142.6 $1,245.9

Raw materials and packaging 392.2 434.9

Grain 93.6 92.0
Excess of FIFO over LIFO cost(a) (202.1) (213.5)

Total $1,426.3 $1,559.3

(a) Inventories of $892.6 million as of May 31, 2020, and $974.8 million as of May 26, 2019,
were valued at LIFO. The difference between replacement cost and the stated LIFO inventory
value is not materially different from the reserve for the LIFO valuation method.

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Part III: Long-term Debt of Cummins, Inc.
Cummins is a multinational corporation that designs, manufactures, and distributes
engines, filtration, and power generation products. A summary of long-term debt per the
Company’s 2020 and 2019 Financial Statements is included on the next page. Using the
information provided, answer the following questions:

NOTE: Assume interest payments are made semi-annually

1. Refer to the 3.65% notes due 2023 (1 st instrument on the table). Calculate the interest
expense on this note for fiscal 2020 (year ended 31 December 2020).

Interest Expense = Interest Rate * Beginning NBV or Bond Payable

3.63%*500= 18.15

2. Refer to the 3.65% notes due 2023 (1 st instrument on the table). Calculate the coupon
payment on this note for fiscal 2020 (year ended 31 December 2020).

Interest Expense = Interest Rate * Beginning NBV or Bond Payable

(3.36%*500)/2= 9.075
(3.36%*500)/2= 9.075
=18.15

3. Refer to the same note as in part (a). Provide the entry that the Company will record
at maturity.

Asset = Liabilities + SE
Cash Bond Payable Income
Statement
Coupon -9.075 -9.075
Payment
Principal -500 -500
Payment

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 CUMMINS INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 11. DEBT (adapted from the 2020 and 2019 Financial Statements)

Long-term Debt

Dec 31,
In millions Interest 2020 2019 2018
Rate
Long-term debt:
Senior notes, due 2023 3.65% $ 500 $ 500 $ 500
Senior notes, due 2025 0.75% 500 --- ---
Debentures, due 2027 6.75% 58 58 58
Debentures, due 2028 7.125% 250 250 250
Senior notes, due 2030 1.50% 850 --- ---
Senior notes, due 2043 4.875% 500 500 500
Senior notes, due 2050 2.60% 650 --- ---
Debentures, due 2098 5.65% 165 165 165
Other debt 132 59 64
Deferred issuance costs (72) (50) (52
)
Fair value adjustments 48 35 25
Finance leases 91 90 132
Total long-term debt 3,672 1, 1,
Less: Current maturities of long-term debt 62 60 64
7 2
31 45
Long-term debt $ 3,610 $ 1,576 $ 1,597

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Part IV: Fixed Assets of Saudi Aramco
On the next page, you can find the Property, Plant and Equipment Footnote of Aramco’s
2020 Annual Report. Using the information provided in the note, please answer the questions
below. All numbers in the questions below and in the footnote are in presented in SAR
millions.

1. How much did Aramco pay to purchase/develop, acquire, and construct additional
Refinery and Petrochemical Facilities in 2020?

Gross PPE: Beginning gross PPE + New purchases (Additions) – PPE sold (original cost or
acquisition cost) = Ending gross PPE

Beginning gross PPE=24,853

New Purchases= 4,881
PPE Sold= 150,889
Gross PPE= 180,623

2. Assume that Aramco received a total of 500 in cash from selling Refinery and
Petrochemical Facilities and there are no asset retirements in 2020.

a. At the time of sale, what was the accumulated depreciation of the Refinery and
Petrochemical Facilities that were sold?

4,572

b. At the time of sale, what was the original cost of the Refinery and Petrochemical
Facilities that were sold?

4,900

c. Calculate the total amount of gain or loss that Aramco recognized on these asset sales.

NBV = Proceeds + Loss Or Proceeds - Gain (sign depends upon gain or loss)

4,900 - 4,572 = $328

Cash received= $500
(500-328)=Gain 172

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 SAUDI ARAMCO
NOTES TO FINANCIAL STATEMENTS

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Part V: Fixed Assets of The New York Times Company
Use the attached balance sheet for the year 2020 to answer the following questions about
long-term assets of The New York Times Company. All numbers in the questions below and
in the balance sheet are in $ thousands.

1. How much did The New York Times originally pay for all the equipment that it owned as
of December 27th, 2020?

470,505

2. Assuming that no Buildings (including Building Equipment and Improvements) were

sold / retired / impaired during the year 2020, how much did The New York Times pay to
purchase / improve Buildings (including Building Equipment and Improvements) during
the year?

722,122-718,194= 3,928

3. Assume that The New York Times had purchased $86,000 in additional equipment and
recorded total depreciation expenses of $42,000 during fiscal year 2020. Also, assume that
the only thing that The New York Times sold was one piece of printing equipment for
$6,000 in cash in 2020.

a. How much did The New York Times originally pay for the piece of equipment that
was sold?

Gross PPE: Beginning gross PPE + New purchases (Additions) – PPE sold (original
cost or acquisition cost) = Ending gross PPE

Beginning PPE= 498,299

New Purchases= 86,000
PPE Sold= -113,794
Ending PPE=470,505

b. At the time of sale, what was the accumulated depreciation on the piece of equipment
that was sold?

Accumulated Depreciation: Beginning AD + Depreciation - AD of asset sold = Ending

Accumulated depreciation
 Beginning AD=950,881
Deprecation =42,000
AD of asset sold= -106,732
Ending Accumulated Depreciation= 886,149

c. Did the company record a gain or a loss on the sale of printing equipment?

NBV = Proceeds + Loss Or Proceeds - Gain (sign depends upon gain or loss)

113,794-106,732= 7,062
Gain/Loss= 6,000-7,062= -1,062

THE NEW YORK TIMES COMPANY

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Part VI: Accounting for Leases
Refer to the Table below from Hilton Worldwide Holdings, Inc.’s 2020 Annual Report
(Note 12 of the notes to the financial statements). Using the information provided, answer
the following questions:

1. What is the present value of the future minimum finance lease payments for Hilton?

252

2. Suppose that the finance lease payments after 2025 will be equally paid over the next 5
years. Calculate the finance lease discount rate for Hilton.

3. What is the journal entry for finance lease payment in fiscal year 2021? Assume payments
are made annually.

Asset = Liabilities + SE
Income
Cash Lease
Statement
252
Beginning
Balance
Lease -68 -54.06 -13.94

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 HILTON WORLDWIDE HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 12 : Leases
We lease hotel properties, land, corporate office space and equipment used at hotels and
corporate offices, with our most significant lease liabilities related to hotel properties. As of
December 31, 2020, we leased 48 hotels under operating leases and six hotels under finance leases,
two of which were the liabilities of consolidated VIEs and were non-recourse to us. Our hotel leases
expire at various dates, with varying renewal and termination options.

Our future minimum lease payments as of December 31, 2020 were as follows:

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