Sunbeam Corporation: Building Financial Statements*
Sunbeam Corporation manufactures and markets branded consumer products. Its primary product groups are (1) outdoor products, including barbecue grills and outdoor furniture, and (2) household products, including small kitchen appliances, electric blankets, and personal care goods. As of December 31, 1995, Sunbeam disclosed the following balance sheet (all amounts except par value in millions):
Cash $ 48
Accounts receivable $ 226
Inventories $ 209
Prepaid expenses $ 20
Other current assets $ 26
Total current assets $ 529
Property, plant, and equipment (net) 287
Intangible assets (net) 214
Other non-current assets 56
Total assets $ 1,086
Liabilities and Shareholders’ Equity
Short-term debt $ 1
Accounts payable 94
Other current liabilities 94
Total current liabilities $ 189
Long-term debt 161
Other long-term liabilities 206
Total long-term liabilities 367
Common stock (par value $.01) 1
Paid-in capital 417
Retained earnings 195
Treasury stock (83)
Total shareholders’ equity 530
Total liabilities and shareholders’ equity $1,086
For the purposes of this exercise, suppose that Sunbeam undertook the following transactions during 1996. Note that these are aggregates of multiple individual transactions and that these transactions are only hypothetical.
1. Subcontracted all manufacturing. Purchased goods (mixers, furniture, blankets, etc.) for $850. Paid $835 in cash to suppliers during the year, leaving the remainder on accounts payable.
2. Sold products for $1,015, initially on account. The balance of accounts receivable remaining at December 31, 1996, was $213. The cost of the products sold was $900.
3. Purchased property, plant and equipment for $75 cash. Recognized depreciation expense on all PP&E of $41 for the year.
4. Intangible assets were used during the year. Recognized amortization expense of $6 for the...