The notes that accompany a company’s financial statements provide informative details that would clutter the amounts and descriptions presented in the statements. Refer to the financial statements of PepsiCo and the Notes to Consolidated Financial Statements in Appendix A.

Instructions 

Answer the following questions. Complete the requirements in millions of dollars, as shown in PepsiCo’s annual report.

(a) What did PepsiCo report for the amount of inventories in its consolidated balance sheet at December 31, 2005? At December 25, 2004?

(b) Compute the dollar amount of change and the percentage change in inventories between 2004 and 2005. Compute inventory as a percentage of current assets at December 31, 2005.

(c) How does PepsiCo value its inventories? Which inventory cost flow method does PepsiCo use? (See Notes to the Financial Statements.)

(d) What is the cost of sales (cost of goods sold) reported by PepsiCo for 2005, 2004, and 2003? Compute the percentage of cost of sales to net sales in 2005.

Data from Appendix A

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Consolidated Statement of Income PepsiCo, Inc. and Subsidiaries Fiscal years ended December 31, 2005, December 25, 2004 and December 27, 2003 PEPSICO 2003 Het Revenue......... Cost of sales. Selling, general and administrative expenses. $32,562 $29,261 $26,971 14,176 12,674 11,691 12.314 11,031 10,148 Amortization of intangible assets. 150 147 145 Restructuring and impairment charges.. 150 147 Merger-related costs... 59 Operating Profit. 5.922 5,259 4,781 Bottling equity income.. 557 380 323 Interest expense... (256) (167) (163) Interest income... 159 74 51 Income from Continuing Operations before Income Taxes. 6.382 5,546 4,992 Provision for Income Taxes......... 2,304 1,372 1,424 Income from Continuing Operations... 4,078 4,174 3,568 Tax Benefit from Discontinued Operations. 38 Net Income Net Income per Common Share Continuing operations.. Discontinued operations.. Total $4,078 $ 4,212 $ 3,568 Basic $2.43 $2.45 $2.07 0.02 $2.43 $2.47 $2.07