This case spans all 12 chapters and is based on the consolidated financial statements of Nestl. As

This case spans all 12 chapters and is based on the consolidated financial statements of Nestlé.

As you work with Nestlé throughout this course, you will develop the confidence and ability to use the financial statements of other companies as well. Refer to Nestlé’s financial statements in Appendix A. If you wish, you can obtain the full annual report from www.nestle.com/investors.

You may find the information overwhelming for now, but try to spot the key principles that we have discussed in this chapter. It will get progressively easier as you gain familiarity with the elements of the financial statements.

Requirements 1. The bank and cash section of the Balance Sheet shows a balance of CHF 7,990 million as of December 31, 2016, and is made up of many different bank accounts, as well as time deposits, certificates of deposit, and perhaps government securities that are equivalent to cash.
Suppose one of Nestlé’s year-end bank statements, dated December 31, 2016, has just arrived at company headquarters. Further assume the bank statement shows Nestlé’s cash balance at CHF 7,990 million and that Nestlé’s record for this bank account has a balance of CHF 8,070 million on the books. You must determine the correct balance for cash in this bank account on December 31, 2016. Suppose you uncover the following reconciling items (all amounts are assumed and are stated in millions):

a. Interest earned on bank balance, CHF 10 million

b. Outstanding checks, CHF 80 million

c. Bank collections of various items, CHF 20 million

d. Deposits in transit, CHF 30 million Prepare a bank reconciliation to show how Nestlé arrived at the correct amount of cash in this bank account at December 31, 2016. Journal entries are not required.
2. Refer to the account in Nestlé’s Balance Sheet entitled “trade and other receivables.” This amount is typically shown net of allowances for doubtful accounts. What does “net” mean?
How does Nestlé determine its allowance for doubtful accounts? You may refer to Note 7.
3. How much is the allowance for bad and doubtful accounts in 2016 and 2015? Assume that the allowance utilized in 2016 was CHF 100 million? Do the journal entries for the writing off of uncollectible accounts and the allowance for bad debts in 2016.

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