Answer the accounting question in doc
Need to do the reformulated sheet in Excel
1. York Inc is a consumer products firm listed in the US stock markets. Its Balance Sheet and Income Statements for the years ending 2019 and 2018 are given below. The Reformulated Statement of Stockholders Equity for the years ending 2019 and 2018 are given below.
YORK INC. INCOME STATEMENTS
Consolidated Income Statement
12 Months Ended
in USD millions, except per share data
Dec. 31, 2019
Dec. 31, 2018
Net Sales
23,815
22,938
Cost of goods sold
15,835
15,234
Gross Profit
7,980
7,704
Sales and general expenses
4,528
4,198
Other (income) and expense, net
185
116
Operating Profit
3,267
3,390
Interest income
24
31
Interest expense
(292)
(330)
Income before tax and other operating income
2,999
3,091
Provision for income taxes
(946)
(895)
Income before other operating income
2,053
2,196
Share of net income of equity companies
277
197
Net Income
2,330
2,393
Net income attributable to NCI
(120)
(132)
Net Income Attributable to Common
2,210
2,261
Earnings Per Share
Basic
Net Income Attributable to Common
3.12
3.19
Diluted
Net Income Attributable to Common
3.09
3.16
YORK INC. BALANCE SHEETS
Consolidated Balance Sheet
Dec. 31, 2019
Dec. 31, 2018
in USD millions
Current Assets
Cash and cash equivalents
1,091
958
Accounts receivable, net
2,966
3,079
Notes receivable
262
242
Inventories
2,848
2,440
Deferred income taxes
224
163
Other current assets
203
155
Total Current Assets
7,594
7,037
Property, Plant and Equipment, net
10,027
9,640
Investments in Equity Companies
449
426
Goodwill
2,884
2,730
Other Intangible Assets
386
372
Long-Term Notes Receivable
430
728
Other Assets
868
918
Total Assets
22,638
21,851
Current Liabilities
Debt payable within one year
293
732
Trade accounts payable
3,903
3,565
Accrued expenses
1,331
1,277
Accrued income taxes
125
95
Dividends payable
323
300
Total Current Liabilities
5,975
5,969
Long-Term Debt
5,784
5,750
Noncurrent Employee Benefits
2,412
2,387
Deferred Income Taxes
755
654
Other Liabilities
269
262
Stockholders’ Equity
Preferred stock – 10 million shares outstanding
10
10
Common stock – 708 million shares outstanding
708
708
Additional paid-in capital
510
479
Common stock held in treasury -70 million shares
(5,671)
(4,904)
Accumulated other comprehensive income (loss)
(1,759)
(2,200)
Retained earnings
13,303
12,395
Total Stockholders’ Equity available to CSE
7,101
6,488
Noncontrolling interests
342
341
Total Stockholders’ Equity
7,443
6,829
Liabilities and Stockholders’ Equity, Total
22,638
21,851
Reformulated Statement of Stockholders Equity (in USD millions)
Balance at December 31, 2017
5,795
Transactions with Shareholders
Stock issues for stock options
490
Stock repurchases
(1,107)
Cash Dividend
(1,458)
Total Transactions with Shareholders
(2,075)
Comprehensive income
Net income reported
2,261
Net translation gain (loss)
743
Pension adjustment
(38)
Other
92
Total Comprehensive income for 2018
3,058
Balance at December 31, 2018
6,778
Balance at December 31, 2018
6,778
Transactions with Shareholders
Stock issues for stock options
178
Stock repurchases
(971)
Cash Dividend
(1,279)
Total Transactions with Shareholders
(2,072)
Comprehensive income
Net income reported
2,210
Net translation gain (loss)
391
Pension adjustment
68
Other
39
Total Comprehensive income for 2019
2,708
Balance at December 31, 2019
7,414
Notes:
The firm bears a 35% statutory tax rate.
Working cash is estimated to be $120 million and $115 million for 2019 and 2018 respectively.
Notes receivable bear interest of 8% per calendar year.
Required:
a) Prepare the Reformulated Balance Sheet and Income Statements for the years 2019 and 2018 in preparation for valuation.
b) Comment on what the reformulated financial statements tell you about Yorks strategy. (200-300 words)
c) Discuss the implications of earnings management for accounting quality. (500-600 words)
2. Discuss the analysis of the profitability as a breakdown of the return of common equity into its drivers. In your discussion explain why borrowing might lever up the return on common equity. (500-600 words)
