ACCY 500 Accounting Measurement,

Reporting and Control

High Engagement Week 7
Question 1: Safety Network Corporation - Shareholders’
Equity
Safety Network Corporation reported the following summarized balance sheet at December
31, 2015:
Assets: No data
Current assets No data
$33,400
Property and equipment, net No data
51,800
Total assets
$85,200

Liabilities: No data
Liabilities No data
$37,800
Stockholders’ equity: No data
Common stock, $1 par No data
6,000
Paid-in capital in excess of par, common No data
19,400
Retained earnings No data
22,000
Total liabilities and equity No data
$85,200

During 2016, Safety Network Corporation completed these transactions that affected
stockholders’ equity:

March 13 Issued 2,000 shares of common stock for $4 per share.

No data
July 7 Declared dividends of $2 per common share.
No data
July 24 Paid the cash dividend.

October 26 Reacquired 500 shares of common stock as treasury stock, paying $7

per share.
No data
November 20 Sold 200 shares of the treasury stock for $8 per share.
Questions:

1. What are the journal or worksheet entries for Safety Network’s transactions?

2. What is Safety Network’s stockholders’ equity at December 31, 2016? Net income for
2016 was $27,000.

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Question 2: Verizon - Shareholders’ Equity
The following pages contain Statement of Changes in Shareholders’ Investment for Verizon
from the 2005 annual report. Using this information, please answer the following questions:

1. What was the number of common shares outstanding at the end of 2005?

2. a. How many shares of common stock did Verizon repurchase in 2005?

b. What was the average price per share Verizon paid for the shares it repurchased in
2005?

c. How many shares did Verizon (re)issue in 2005?

d. What was the average price Verizon received from issuing shares to employees and
shareowners in 2005?

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 Consolidated Statements of Changes in Shareowners’ Investment
(dollars in millions, except per share amounts, and shares in
thousands)
Years Ended December 31, 2005 2004 2003
Shares Amount Shares Amount Shares Amount
Common Stock No data No data No data No data No data No data
Balance at beginning of year 2,774,86 $277 2,772,31 $277 2,751,650 $275
5 4
Shares issued No data No data No data No data No data No data
Employee plans - - 2,501 - 20,664 2
Shareowner plans - - 50 - - -
Shares retired - - - - - -
Balance at end of year 2,774,86 277 2,774,86 277 2,772,314 277
5 5
No data No data No data No data No data
Contributed Capital
Balance at beginning of year No data 25,404 No data 25,363 No data 24,685
Shares issued-employee and shareowner plans No data (24) No data 2 No data 725
Tax benefit from exercise of stock options No data - No data 41 No data 12
Other No data (11) No data (2) No data (59)
Balance at end of year No data 25,369 No data 25,404 No data 25,363
No data No data No data No data No data No data
Reinvested Earnings
Balance at beginning of year No data 12,984 No data 9,409 No data 10,536
Net income No data 7,397 No data 7,831 No data 3,077
Dividends declared ($1.62, $1.54 and $1.54 per No data (4,479) No data (4,265) No data (4,250)
share)
Shares issued-employee and shareowner plans No data - No data - No data 39
Other No data 3 No data 9 No data 7
Balance at end of year No data 15,905 No data 12,984 No data 9,409
No data No data No data No data No data No data
Accumulated Other Comprehensive Loss
Balance at beginning of year No data (1,053) No data (1,250) No data (2,110)
Foreign currency translation adjustment No data (755) No data 548 No data 568
Unrealized gains on net investment hedges No data 2 No data - No data -
Unrealized gains (losses) on marketable securities No data (21) No data 7 No data 1
Unrealized derivative gains (losses) on cash flow No data 10 No data 17 No data (21)
hedges
Minimum pension liability adjustment No data 34 No data (375) No data 312
Other comprehensive income (loss) No data (730) No data 197 No data 860
Balance at end of year No data (1,783) No data (1,053) No data (1,250)
No data No data No data No data No data No data
Treasury Stock
Balance at beginning of year (5,213) (142) (4,554) (115) (8,624) (218)
Shares purchased (7,859) (271) (9,540) (370) - -
Shares distributed No data No data No data No data No data No data
Employee plans 1,594 59 8,881 343 4,047 102
Shareowner plans 22 1 - - 23 1
Balance at end of year (11,456) (353) (5,213) (142) (4,554) (115)
No data No data No data No data No data No data
Deferred Compensation-ESOPs and Other
Balance at beginning of year No data 90 No data (218) No data (552)
Amortization No data 174 No data 301 No data 312
Other No data 1 No data 7 No data 22
Balance at end of year No data 265 No data 90 No data (218)
Total Shareowners’ Investment No data $39,680 No data $37,560 No data $33,466
No data No data No data No data No data
Comprehensive Income
Net income No data $7,397 No data $7,831 No data $3,077
Other comprehensive income (loss) per above No data (730) No data 197 No data 860
Total Comprehensive Income No data $6,667 No data $8,028 No data $3,937

See Notes to Consolidated Financial Statements.

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Question 3: Coca Cola - Shareholders’ Equity
Using the attached excerpts from Coca-Cola’s 2006 Annual Report answer the following
questions. In addition:
- All numbers in Coca-Cola’s 2006 Financial Statements are in $ millions.
- Provide calculations when necessary.

1. Shares Issued and Outstanding

(a) How many shares of common stock were authorized at fiscal year-end 2006? How
many had been issued as of fiscal year-end 2006?

(b) Coca-Cola also has repurchased some of its own shares of stock that had been
previously issued (Treasury Stock). How many shares did Coca Cola hold as treasury
stock at the end of 2006?

(c) How many total shares were outstanding at fiscal year-end 2006?

2. Common Stock

(a) What is the par value of each share of common stock issued?

(b) How much money in excess of the par value of the stock had been contributed by
shareholders by the end of 2006?

(c) How much did Coca Cola pay for Treasury Stock it held at fiscal year-end 2006?

3. Transactions related to Shareholders’ Equity

For each activity below, provide the entry made by Coca-Cola (with amounts):

(a) record the declaration and payment of dividends in 2006.

(b) record the purchase of Treasury Stock in 2006.

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4. Earnings per share

a) What is Coca Cola’s Basic Earnings per Share in 2006?

b) What is Coca Cola’s Diluted Earnings per Share in 2006?

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 THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31, 2006 2005

(In millions except par value) No data No data
ASSETS No data No data
CURRENT ASSETS No data No data
Cash and cash equivalents $2,440 $4,701
Marketable securities 150 66
Trade accounts receivable, less allowances of $63 and $72, respectively 2,587 2,281
Inventories 1,641 1,379
Prepaid expenses and other assets 1,623 1,778
TOTAL CURRENT ASSETS 8,441 10,205
INVESTMENTS No data No data
Equity method investments: No data No data
Coca-Cola Enterprises Inc. 1,312 1,731
Coca-Cola Hellenic Bottling Company S.A. 1,251 1,039
Coca-Cola FEMSA, S.A.B. de C.V. 835 982
Coca-Cola Amatil Limited 817 748
Other, principally bottling, companies 2,095 2,062
Cost method investment, principally bottling companies 473 360
TOTAL INVESTMENTS 6,783 6,922
OTHER ASSETS 2,701 2,648
PROPERTY, PLANT AND EQUIPMENT – net 6,903 5,831
TRADMARKS WITH INDEFINITE LIVES 2,045 1,946
GOODWILL 1,403 1,047
OTHER INTANGIBLE ASSETS 1,687 828
TOTAL ASSETS $29,963 $29,427
LIABILITIES AND SHAREOWNERS EQUITY No data No data
CURRENT LIABILITIES No data No data
Accounts payable and accrued expenses $5,055 $4,493
Loans and notes payable 3,235 4,518
Current maturities of long-term debt 33 28
Accrued income taxes 567 797
TOTAL CURRENT LIABILITIES 8,890 9,836
LONG-TERM DEBT 1,314 1,154
OTHER LIABILITIES 2,231 1,730
DEFERRED INCOME TAXES 608 352
SHAREOWNERS’ EQUITY No data No data
Common stock, $0.25 par value; Authorized – 5,600 shares; No data No data
Issued – 3,511 and 3,507 shares, respectively 878 877
Capital surplus 5,983 5,492
Reinvested earnings 33,468 31,299
Accumulated other comprehensive income (loss) (1,291) (1,669)
Treasury stock, at cost – 1,193 and 1,138 shares. Respectively (22,118) (19,644)
TOTAL SHAREOWNERS’ EQUITY 16,920 16,355
TOTAL LIABILITIES AND SHAREOWNERS’ EQUITY $29,963 $29,427

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 THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31 2006 2005 2004

(In millions except per share data) No data No data No data

NET OPERATING REVENUES $24,088 $23,104 $21,742

Costs of goods sold 8,164 8,195 7,674
GROSS PROFIT 15,924 14,909 14,068
Selling, general and administrative expenses 9,431 8,739 7,890
Other operating charges 185 85 480
OPERATING INCOME 6,308 6,085 5,698
Interest income 193 235 157
Interest expense 220 240 196
Equity income – net 102 680 621
Other income (loss) – net 195 (93) (82)
Gains on issurances of stock by equity method investees - 23 24
INCOME BEFORE INCOME TAXES 6,578 6,690 6,222
Income taxes 1,498 1,818 1,375
NET INCOME $ 5,080 $ 4,872 $ 4,847
BASIC NET INCOME PER SHARE $ 2.16 $2.04 $2.00
DILUTED NET INCOME PER SHARE $ 2.16 $2.04 $2.00
AVERAGE SHARES OUTSTANDING 2,348 2,392 2.426
Effect of dilutive securities 2 1 3
AVERAGE SHARES OUTSTANDING ASSUMING DILUTION 2,350 2,393 2,429

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 THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREOWNERS’ EQUITY

Year Ended December 31, 2006 2005 2004

(In millions except per share data) No data No data No data
No data No data No data
NUMBER OF COMMON SHARES OUTSTANDING
Balance at beginning of year 2,369 2,409 2,442
Stock issued to employees exercising stock options 4 7 5
Purchases of stock for treasury1 (55) (47) (38)
Balance at end of year 2,318 2,369 2,409
COMMON STOCK No data No data No data
Balance at beginning of year $ 877 $ 875 $ 874
Stock issued to employees exercising stock options 1 2 1
Balance at end of year 878 877 875
CAPITAL SURPLUS No data No data No data
Balance at beginning of year 5,492 4,928 4,395
Stock issued to employees exercising stock options 164 229 175
Tax benefit from employees’ stock option and restricted stock plans 3 11 13
Stock-based compensation 324 324 345
Balance at end of year 5,983 5,492 4,928
REINVESTED EARNING No data No data No data
Balance at beginning of year 31,299 29,105 26,687
Net income 5,080 4,872 4,847
Dividends (per share - $1.24, $1.12 and $1.00 in 2006, 2005 and 2004, (2,911) (2,678) (2,429)
respectively)
Balance at end of year 33,468 31,299 29,105
ACCUMULATED OTHER COMPRENHENSIVE INCOME (LOSS) No data No data No data
Balance at beginning of year (1,669) (1,348) （1,995）
Net foreign currency translation adjustment 603 (396) 665
Net gain (loss) on derivatives (26) 57 (3)
Net change in unrealized gain on available-for-sale securities 43 13 39
Net change in pension liability, prior to adoption of SFAS No. 158 46 5 (54)
Net other comprehensive income adjustments 666 (321) 647
Adjustment to initially apply SFAS No. 158 (288) - -
Balance at end of year (1,291) (1,669) (1,348)
TREASURY STOCK No data No data No data
Balance at beginning of year (19,644) (17,625) (15,871)
Purchases of treasury stock (2,474) (2,019) (1,754)
Balance at end of year (22,118) (19,644) (17,625)
TOTAL SHAREOWNERS’ EQUITY $ $16,355 $ 15,935
16,920
COMPRENHENSIVE INCOME No data No data No data
Net income $ $ 4,872 $ 4,847
5,080
Net other comprehensive income adjustments 666 (321) 647
TOTAL COMPREHENSIVE INCOME $ $ 4,551 $ 5,494
5,746

1
Common stock purchased from employees exercising stock options numbered approximately zero shares, 0.5 shares and 0.4
shares for the years ended December 31, 2006, 2005 and 2004, respectively.

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 THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31, 2006 2005 2004

(In millions) No data No data No data
No data No data No data
OPERATING ACTIVITIES
Net income $5,080 $4,872 $4,847
Depreciation and amortization 938 932 893
Stock-based compensation expense 324 324 345
Deferred income taxes (35) (88) 162
Equity income or loss, net of dividends 124 (446) (476)
Foreign currency adjustments 52 47 (59)
Gains on issuances of stock by equity investees - (23) (24)
Gains on sales of assets, including bottling interests (303) (9) (20)
Other operating charges 159 85 480
Other items 233 299 437
Net change in operating assets and liabilities (615) 430 (617)
Net cash provided by operating activities 5,957 6,423 5,968
INVESTING ACTIVITIES No data No data No data
Acquisitions and investments, principally trademarks and bottling companies (901) (637) (267)
Purchases of other investments (82) (53) (46)
Proceeds from disposals of other investments 640 33 161
Purchases of property, plant and equipment (1,407) (899) (755)
Proceeds from disposals of property, plant and equipment 112 88 341
Other investing activities (62) (28) 63
Net cash used in investing activities (1,700) (1,496) (503)
FINANCING ACTIVITIES No data No data No data
Issuances of debt 617 178 3,030
Payments of debt (2,021) (2,460) (1,316)
Issuances of stock 148 230 193
Purchases of stock for treasury (2,416) (2,055) (1,739)
Dividends (2,911) (2,678) (2,429)
Net cash used in financing activities (6,583) (6,785) (2,261)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH 65 (148) 141
EQUIVALENTS
CASH AND CASH EQUIVALENTS No data No data No data
Net (decrease) increase during the year (2,261) (2,006) 3,345
Balance at beginning of year 4,701 6,707 3,362
Balance at end of year $2,440 $4,701 $6,707

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