Complete the worksheet in 2 page:
Instructions: Locate the Financial Statements for Tootsie Roll Industries for 2014: https://www.tootsie.com/financials/You can download them to your hard drive. Become familiar with the information on the annual report. Look at the Balance Sheet, Income Statement, Statement of Cash flows and read through the "Notes to the Consolidated Financial Statements" found on pages 18 - 25 and the "Management Discussion and Analysis of Financial Condition and Results of Operations"
INVENTORY: (Response the questions below):
1. What inventory method does Tootsie Roll use? How can this method impact the income statement as compared to other available methods? (Page 18 of the Tootsie Roll Industries 2014 Annual Report)
2. What are the different categories of inventory found on the balance sheet for Tootsie Roll? What is the balance for each category for 2013 and 2014? (Page 15 of the Tootsie Roll Industries 2014 Annual Report)
Based on the information in the financial statements, compute the following 2014 values for the company. (Do not adjust for the LIFO reserve.)
3) Inventory turnover ratio.(Use product cost of goods sold and total inventory.)Please refer to Chapter 6 page 297 for the discussion on Inventory turnover ratio and the formula.
The formula for the Inventory Turnover ratio is: Cost of Goods sold
Average Total Inventory
Average inventory is calculated by taking the Total Inventory for 2013 plus Total Inventory for 2014 and divide by 2. Use this number in the formula above. Please refer to the "Decision ToolKit" on page 298.
4) Days in inventory. The formula for Days in Inventory is: 365 divided by Inventory Turnover Ratio.
5) What conclusions concerning the management of the inventory can you draw from these data? (Here you need to apply what you learned about these two ratio's (page 298) and explain what the results of the calculations are "telling you" about how the company is "managing" their inventory)
INTERNAL CONTROLS
Using the financial statements and reports, answer these questions about Tootsie Roll's internal controls and cash..
(6) What comments, if any, are made about cash in the "Report of Independent Registered Public ?Accounting Firm"?
(7) What data about cash and cash equivalents are shown in the consolidated balance sheet (statement of financial position)?
(8) How are cash equivalents defined in the Notes to Consolidated Financial Statements? (Refer to page 18 in the 2014 Tootsie Roll Industries Annual Report)
(9) Read the section of the report titled "Management's Report on Internal Control Over Financial Reporting." Summarize the statements made in that section of the report.