Arnav Sharan HW 2

School: Baruch College, CUNY - Course: FINA MISC - Subject: Accounting

Principles of Financial Accounting - Homework #2 (Due 2:00 pm on March 3, Wednesday) Instructions: Please submit your answers electronically to Brightspace. You may work in groups, but each individual should submit his/her own answers to Brightspace. The assignment will be graded on effort (i.e., you will get full points if you show sufficient effort in answering all the questions, regardless of whether your answers are correct). Question 1 - PepsiCo In this question, we will examine financial information from PepsiCo, Inc. Find PepsiCo's most recent financial statements as of December 26, 2020. Note that they are in an unconventional place within the Form 10-K. From PepsiCo's statement of income for 2020, find the amount (exactly as in the statement) and indicate whether that amount represents an increase or decrease in net assets. I have filled in the first row as an example. (amounts in millions)AmountNet Assets Net Revenue70,372Increase Cost of sales31,797Decrease Selling, general and administrative expenses28,495Decrease Other pension and retiree medical benefits income/(expense)117Increase Net interest expense and other(1,128)Decrease Provision for/(benefit from) income taxes1,894Decrease Answer the following questions using PepsiCo's statement of income for 2018-2020 (all presented together in the Form 10-K you found). (1) Did PepsiCo's net income increase or decrease over time? Yes (2) From (1), would you conclude that PepsiCo's operations are declining in performance? What do the trends of net revenue, gross profit, and operating profit suggest? Revenue's are increasing indicating performance is doing well, however, the increased costs are causing the net income to decrease. (3) Which account is most responsible for your answer in (1) despite the trends of operating performance you see in (2)? Provision for/(benefit from) income taxes 1

Principles of Financial Accounting - Homework #2 Question 2 - UPS In this question, we will examine financial information from United Parcel Service, Inc. Find UPS's most recent financial statements as of December 31, 2020. Looking at UPS's balance sheet as of December 31, 2020, explain what future economic benefit UPS expects from the following assets and what future economic sacrifices UPS expects to make with regard to the following liabilities. If there is a counterpart of that economic benefit or sacrifice, make it clear. (1) Accounts receivable Future economic benefit: Cash Counterpart: Accounts payable (2) Property, plant and equipment Future economic benefit: Increase in productivity and growth (3) Accounts payable Future economic sacrifice: Credit Balance Counterpart:Accounts receivable (4) Accrued wages Future economic sacrifice: Incurred expense Counterpart: Prepaid wages (5) Self-insurance reserves (read Note 1 in pages 66-67) Future economic sacrifice: Cost of claims paid for already by reserves Answer the following questions using UPS's balance sheet for 2019-2020 (all presented together in the Form 10-K you found). (1) Using Note 5 in page 79, estimate how much economic benefits UPS has already exhausted from its property, plant and equipment as of December 31, 2020. 29,837 (2) Using Note 8 in page 96, estimate how much economic benefits UPS has already exhausted from its intangible assets as of December 31, 2020. 3,469 (3) Did UPS's retained earnings increase or decrease during 2020? If it decreased, does it imply that UPS recorded losses in 2020? If not, why? Use UPS's statement of income to check your answer. Decreased, no because the company could have paid more dividends (4) Your answer in (3) can be more easily answered by looking at UPS's statement of shareholder equity. Explain which note contains UPS's statement of shareholder equity and check your answer to (3).