Below there are magnified images. Please fill in those 15 adjustments and update the new Income statement retained earnings and balance sheet

Required: Enter the adjustments in the worksheet and update the Income statement, retained earnings. & Balance sheet.

Answers:

net income:9257

ending retained earnings:44,203

net property plant and equipment 12782

totally assets 79746

Amounts are in $millions

1 Okay, let's get depreciation out of the way first. Let's pretend Merck uses both straight-line and

double declining balance (DDB) depreciation methods. Let's assume it uses DDB for Buildings and

and straight-line for Machinery, equipment and office furnishings. Land and Construction in progress

are not depreciated. Assum $9,600 of accumulated depreciation is associated with Buildings and the

remainder ($8,086) is associated with Machinery, equipment and office funishings. Further assume that

Buildings have a depreciable life of 23 years. Assume Machiery, equipment and office furnishings has a

6-year life and $900 salvage value. Please record depreciation.

2 Some office furnishings were sold for $1,550 cash. The office furnishings had a cost of $2,600 and had been

depreciated $1,900. Record the sale.

3 Purchased laboratory equipment for $230. Additional costs included freight of $2, labor to install the

equipment $3, labor to calibrate the equipment $1. Cash of $150 was paid and the rest was financed with a

long-term loan.

4 Made extensive expenditures to improve laboratory machinery $6. These expenditures doubled the

productivity of the machinery. Cash was paid.

5 Made significant expenditures to repair old buildings, $11, paid in cash. These repairs did not "improve"

the buildings or increase their life.

6 Buildings were lost in a fire. The cost of the buildings was $160 and they had been depreciated $110.

Insurance paid for $38, received in cash.

7 Merck developed several new pharmaceitical medicines, and successfully patented the medicines for

several years, cost of the patents was $9, paid in cash.

8 Merck developed a new logo for its brand and had the logo trademarked, paying $4 cash.

9 Merck purchased another pharmaceutical company, for cash. The net assets (assets minus liabilities)

acquired were, at their fair market values, accounts receivable $24, inventories $180, other current assets $15,

buildings $860, trade accounts payable $19, long-term debt $200. Merck paid $1,600 cash for this

company.

(continued on next page)

10 Intangible asset amortization was $990. Please record this amortization.

11 Let's talk about something new, Deferred Income Taxes, shown as a liability on Merck's balance sheet.

Deferred income taxes are created when there are timing differences between when a revenue or expense is

recognized by a company on its financial statements and when the item is taxable as income or an expense

for tax purposes. Overall the income or expense will be the same for both tax and financial statement

purposes; the difference is the year in which it is shown as a revenue or expense for financial

purposes will differ from when it is expensed or a revenue for tax purposes. When Deferred income taxes

is an asset, it means that there are future tax benefits due to these timing differences. When Deferred

income taxes is a liability, it means that there will be additional taxes to be paid in the future due to these

timing differences. Okay, enough about that. Assume that the 2019 tax return (form 1120) was filed,

and that it was determined that due to timing differences, the Deferred income tax liability should

increase $30. Please record this, and record the income statement effect in Taxes on Income.

12 Pharmaceutical sales of $3,800 were made, for cash. Cost of the items sold was $800.

13 Wages were paid, $570, cash.

14 Cash dividends paid were $3,400. $1,587 was liquiditing the Dividends payable on the balance sheet (this is

a dividend that was declared sometime earlier but not paid at that time) and the rest was this year's

declared dividend and is a reduction of retained earnings.

15 Paid Loans payable and current portionf of long-term debt of $1,000, plus interest on these loans of

$200, total cash paid was $1,200.

46,840 1 Merck & Co, Inc. 2 Statement of Income 3 Year ended December 31, 2019 4 (Amounts in Smillions) 5 Sales 6 Costs, expenses and Other 7 Cost of sales 8 Selling, general and administrative 9 Research and development 10 Restructuring costs 11 Other (income) expense, net 12 Total Costs, expenses and Other 13 Income Before Taxes 14 Taxes on Income 15 Net income 16 Less: Net (Loss) Income Attributable to Noncontrolling Inter 17 Net income attributable to Merck & Co, Inc. 18 19 Merck & Co., Inc. 20 Statement of Retained Earnings 21 Year ended December 31, 2019 22 Balance, December 31, 2018 23 Net income attributable to Merck & Co, Inc. 24 Cash dividends declared on common stock 25 Balance, September 28, 2018 14,112 10,615 9,872 638 139 35,376 11,464 1,687 9,777 (66) 9,711 1,788 9,843 (5,820) 5,811 B w N Balance Sheet December 31, 2019 4 (Amounts in Smillions) 5 Assets 6 Current Assets 7 Cash and cash equivalents 8 Short-term investments 9 Accounts receivable (net of allowance for doutbtul accounts of $86) 10 Inventories 11 Other current assets 12 Total current assets 13 Investments 14 Property, Plant and Equipment (at cost) 15 Land 16 Buildings 17 Machinery, equipment and office furnishings 18 Construction in progress 19 Less - Accumulated depreciation 20 Goodwill 21 Other Intangibles, Net 22 Other Assets 23 Total Assets 9,676 774 6,778 5,978 4,277 27,483 1,469 343 11,989 15,394 5,013 17,686 19,425 14,196 6,771 84,397 3,610 3,738 12,549 736 1,587 22,220 22,736 1,470 11,970 24 Liabilities and Equity 25 Current Liabilities 26 Loans payable and current portion of long-term debt 27 Trade accounts payable 28 Accrued and other current liabilities 29 Income taxes payable 30 Dividends payable 31 Total current liabilities 32 Long-Term Debt 33 Deferred Income Taxes 34 Other Noncurrent Liabilities 35 Merck & Co, Inc. Stockholders' Equity 36 Common stock, $.50 par value 37 Other paid-in capital 38 Retained earnings 39 Accumulated other comprehensive loss 40 41 Less treasury stock, at cost, 1,038,087,496 shares 42 Total Merck & Co, Inc. stockholders' equity 43 Noncontrolling interests 44 Total liabilities and shareholder's equity 45 1,788 39,660 46,602 (6,193) 55,950 25,907 94 84,397 2 1 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Updated 46,840 14,112 10,615 9,872 cee 638 400 139 225 35,376 11,464 2 Statement of Income 3 Year ended December 31, 2019 4 (Amounts in Smillions) 5 Sales 5 6 Costs, expenses and Other 7 1 Cost of sales 8 Selling, general and administrative 9 Research and development 10 10 Restructuring costs 44 Oth 11 Other (income) expense, net 45 12 Total Costs, expenses and Other 13 Income Before Taxes 14 Taxes on Income 15 15 Net income 16 Less: Net (Loss) Income Attributable to Noncontrolling Inter 17 Net income attributable to Merck & Co, Inc. 18 19 Merck & Co., Inc. 20 Statement of Retained Earnings 21 Year ended December 31, 2019 22 Balance, December 31, 2018 23 Net income attributable to Merck & Co, Inc. 24 Cash dividends declared on common stock 25 Balance, September 28, 2018 26 1,687 9,777 (66) 9,711 1,788 9,843 (5,820) 5,811 B C E F G . J R M N Q R 1 2 3 3 4 5 5 6 7 8 9 10 11 12 13 14 15 Updated 1 Merck & Co, Inc. 2 Balance Sheet 3 December 31, 2019 4 (Amounts in Smillions) 5 Assets 6 Current Assets 7 Cash and cash equivalents 8 Short-term investments 9 Accounts receivable (net of allowance for doutbtul accounts of $86) 10 Inventories 11 Other current assets 19 12 Total current assets 13 Investments 14 Property, Plant and Equipment (at cost) 15 Land 16 Buildings 17 Machinery, equipment and office furnishings 18 Construction in progress wa 19 Less - Accumulated depreciation 20 Goodwill 21 Other Intangibles, Net 22 Other Assets 23 Total Assets 9,676 774 6,778 5,978 4,277 27,483 1,469 343 11,989 15,394 5,013 17,686 19,425 14,196 6,771 84,397 84,397 23 Total Assets 24 Liabilities and Equity 25 Current Liabilities 26 Loans payable and current portion of long-term debt 27 27 Trade accounts payable 28 Accrued and other current liabilities 20 Accrued and 29 Income taxes payable 30 Dividends payable 31 Total current liabilities 32 Long-Term Debt 33 Deferred Income Taxes 34 Other Noncurrent Liabilities 35 Merck & Co, Inc. Stockholders' Equity 36 Common stock, $.50 par value 37 Other paid-in capital 38 Retained earnings 39 Accumulated other comprehensive loss 20 40 41 Less treasury stock, at cost, 1,038,087,496 shares 42 Total Merck & Co, Inc. stockholders' equity 43 Noncontrolling interests 44 Total liabilities and shareholder's equity JE 3,610 3,738 12,549 736 736 ares 1,587 22,220 22,736 1,470 11,970 1,788 39,660 46,602 (6,193) 55,950 25,907 94 84,397 a 46,840 1 Merck & Co, Inc. 2 Statement of Income 3 Year ended December 31, 2019 4 (Amounts in Smillions) 5 Sales 6 Costs, expenses and Other 7 Cost of sales 8 Selling, general and administrative 9 Research and development 10 Restructuring costs 11 Other (income) expense, net 12 Total Costs, expenses and Other 13 Income Before Taxes 14 Taxes on Income 15 Net income 16 Less: Net (Loss) Income Attributable to Noncontrolling Inter 17 Net income attributable to Merck & Co, Inc. 18 19 Merck & Co., Inc. 20 Statement of Retained Earnings 21 Year ended December 31, 2019 22 Balance, December 31, 2018 23 Net income attributable to Merck & Co, Inc. 24 Cash dividends declared on common stock 25 Balance, September 28, 2018 14,112 10,615 9,872 638 139 35,376 11,464 1,687 9,777 (66) 9,711 1,788 9,843 (5,820) 5,811 B w N Balance Sheet December 31, 2019 4 (Amounts in Smillions) 5 Assets 6 Current Assets 7 Cash and cash equivalents 8 Short-term investments 9 Accounts receivable (net of allowance for doutbtul accounts of $86) 10 Inventories 11 Other current assets 12 Total current assets 13 Investments 14 Property, Plant and Equipment (at cost) 15 Land 16 Buildings 17 Machinery, equipment and office furnishings 18 Construction in progress 19 Less - Accumulated depreciation 20 Goodwill 21 Other Intangibles, Net 22 Other Assets 23 Total Assets 9,676 774 6,778 5,978 4,277 27,483 1,469 343 11,989 15,394 5,013 17,686 19,425 14,196 6,771 84,397 3,610 3,738 12,549 736 1,587 22,220 22,736 1,470 11,970 24 Liabilities and Equity 25 Current Liabilities 26 Loans payable and current portion of long-term debt 27 Trade accounts payable 28 Accrued and other current liabilities 29 Income taxes payable 30 Dividends payable 31 Total current liabilities 32 Long-Term Debt 33 Deferred Income Taxes 34 Other Noncurrent Liabilities 35 Merck & Co, Inc. Stockholders' Equity 36 Common stock, $.50 par value 37 Other paid-in capital 38 Retained earnings 39 Accumulated other comprehensive loss 40 41 Less treasury stock, at cost, 1,038,087,496 shares 42 Total Merck & Co, Inc. stockholders' equity 43 Noncontrolling interests 44 Total liabilities and shareholder's equity 45 1,788 39,660 46,602 (6,193) 55,950 25,907 94 84,397 2 1 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Updated 46,840 14,112 10,615 9,872 cee 638 400 139 225 35,376 11,464 2 Statement of Income 3 Year ended December 31, 2019 4 (Amounts in Smillions) 5 Sales 5 6 Costs, expenses and Other 7 1 Cost of sales 8 Selling, general and administrative 9 Research and development 10 10 Restructuring costs 44 Oth 11 Other (income) expense, net 45 12 Total Costs, expenses and Other 13 Income Before Taxes 14 Taxes on Income 15 15 Net income 16 Less: Net (Loss) Income Attributable to Noncontrolling Inter 17 Net income attributable to Merck & Co, Inc. 18 19 Merck & Co., Inc. 20 Statement of Retained Earnings 21 Year ended December 31, 2019 22 Balance, December 31, 2018 23 Net income attributable to Merck & Co, Inc. 24 Cash dividends declared on common stock 25 Balance, September 28, 2018 26 1,687 9,777 (66) 9,711 1,788 9,843 (5,820) 5,811 B C E F G . J R M N Q R 1 2 3 3 4 5 5 6 7 8 9 10 11 12 13 14 15 Updated 1 Merck & Co, Inc. 2 Balance Sheet 3 December 31, 2019 4 (Amounts in Smillions) 5 Assets 6 Current Assets 7 Cash and cash equivalents 8 Short-term investments 9 Accounts receivable (net of allowance for doutbtul accounts of $86) 10 Inventories 11 Other current assets 19 12 Total current assets 13 Investments 14 Property, Plant and Equipment (at cost) 15 Land 16 Buildings 17 Machinery, equipment and office furnishings 18 Construction in progress wa 19 Less - Accumulated depreciation 20 Goodwill 21 Other Intangibles, Net 22 Other Assets 23 Total Assets 9,676 774 6,778 5,978 4,277 27,483 1,469 343 11,989 15,394 5,013 17,686 19,425 14,196 6,771 84,397 84,397 23 Total Assets 24 Liabilities and Equity 25 Current Liabilities 26 Loans payable and current portion of long-term debt 27 27 Trade accounts payable 28 Accrued and other current liabilities 20 Accrued and 29 Income taxes payable 30 Dividends payable 31 Total current liabilities 32 Long-Term Debt 33 Deferred Income Taxes 34 Other Noncurrent Liabilities 35 Merck & Co, Inc. Stockholders' Equity 36 Common stock, $.50 par value 37 Other paid-in capital 38 Retained earnings 39 Accumulated other comprehensive loss 20 40 41 Less treasury stock, at cost, 1,038,087,496 shares 42 Total Merck & Co, Inc. stockholders' equity 43 Noncontrolling interests 44 Total liabilities and shareholder's equity JE 3,610 3,738 12,549 736 736 ares 1,587 22,220 22,736 1,470 11,970 1,788 39,660 46,602 (6,193) 55,950 25,907 94 84,397 a