I need help with only questions 1-3 on this case. (relating to minority, passive investments and where they are located on the balance sheet

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Intercorporate Investments Coca Cola Coca-Cola has substantial investment in equity and debt securities of other companies. Moreover, certain bottling operations in which Coca Cola has a substantial ownership interest are designated as anchor bottlers. Coca Cola's brands are the primary products for these bottlers, and as franchises and strategic partners they derive significant marketing, operating, and financial support from Coca Cola. Anchor bottlers produced and distributed over 40% of Coca Cola's worldwide unit case volume. Attached are excerpts from Coca-Cola's 2007 financial statements relating to Coca-Cola's investments. sh is ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m Required: What is the total amount of minority, passive investments in securities of other companies at the end of fiscal 2007? [Include debt securities in minority, passive investments] 2. Where are these investments located on Coca-Cola's balance sheet? 3. How are these investments classified by Coca-Cola? 4. What is the total amount of minority, active investments in securities of other companies at the end of fiscal 2007? 5. What amount of earnings did Coca Cola record for equity method investees in fiscal 2007? 6. What was the amount of Coca Cola Enterprises' earnings recorded by Coca Cola in 2007? 7. What amount of earnings did Coca Cola record for equity method investees other than Coca Cola Enterprises in 2007? 8. Did any of Coca Cola's equity method investees pay dividends during 2007? If yes, what was the dollar amount of Coca Cola's share? 9. Suppose that Coca Cola was required (always) to account for all its equity method investments as a passive investment. What amount would Coca Cola show on its Balance Sheet at December 31, 2007? Th 1. 10. What would Coca Cola's Return-on-Assets be in 2007 under this alternative accounting method? How does this compare to its actual Return-on-Assets? [Use Net Income and the ending balance of Total Assets in your calculation of these two ratios. Ignore income tax effects]. https://www.coursehero.com/file/16295936/coca-cola/ CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, (In millions except per share data) 2007 w as s ha re d $ Th is ou st rs ud eH y er res o. ou co rc m e NET OPERATING REVENUES Cost of goods sold GROSS PROFIT Selling, general and administrative expenses Other operating charges OPERATING INCOME Interest income Interest expense Equity incomenet Other income (loss)net Gains on issuances of stock by equity method investees INCOME BEFORE INCOME TAXES Income taxes NET INCOME BASIC NET INCOME PER SHARE DILUTED NET INCOME PER SHARE AVERAGE SHARES OUTSTANDING Effect of dilutive securities AVERAGE SHARES OUTSTANDING ASSUMING DILUTION https://www.coursehero.com/file/16295936/coca-cola/ vi a THE COCA-COLA COMPANY AND SUBSIDIARIES $ $ $ 28,857 10,406 18,451 10,945 254 7,252 236 456 668 173 7,873 1,892 5,981 2.59 2.57 2,313 18 2,331 2006 $ $ $ $ 24,088 8,164 15,924 9,431 185 6,308 193 220 102 195 6,578 1,498 5,080 2.16 2.16 2,348 2 2,350 2005 $ $ $ $ 23,104 8,195 14,909 8,739 85 6,085 235 240 680 (93) 23 6,690 1,818 4,872 2.04 2.04 2,392 1 2,393 THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, (In millions except par value) $ 4,093 215 3,317 2,220 2,260 12,105 1,637 1,549 996 806 2,301 488 7,777 2,675 8,493 5,153 4,256 2,810 43,269 $ Th sh is ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m ASSETS CURRENT ASSETS Cash and cash equivalents Marketable securities Trade accounts receivable, less allowances of $56 and $63, respectively Inventories Prepaid expenses and other assets TOTAL CURRENT ASSETS INVESTMENTS Equity method investments: Coca-Cola Enterprises Inc. Coca-Cola Hellenic Bottling Company S.A. Coca-Cola FEMSA, S.A.B. de C.V. Coca-Cola Amatil Limited Other, principally bottling companies and joint ventures Cost method investments, principally bottling companies TOTAL INVESTMENTS OTHER ASSETS PROPERTY, PLANT AND EQUIPMENTnet TRADEMARKS WITH INDEFINITE LIVES GOODWILL OTHER INTANGIBLE ASSETS TOTAL ASSETS LIABILITIES AND SHAREOWNERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses Loans and notes payable Current maturities of long-term debt Accrued income taxes TOTAL CURRENT LIABILITIES LONG-TERM DEBT OTHER LIABILITIES DEFERRED INCOME TAXES SHAREOWNERS' EQUITY Common stock, $0.25 par value; Authorized5,600 shares; Issued3,519 and 3,511 shares, respectively Capital surplus Reinvested earnings Accumulated other comprehensive income (loss) Treasury stock, at cost1,201 and 1,193 shares, respectively TOTAL SHAREOWNERS' EQUITY TOTAL LIABILITIES AND SHAREOWNERS' EQUITY 2006 2007 https://www.coursehero.com/file/16295936/coca-cola/ $ $ 6,915 5,919 133 258 13,225 3,277 3,133 1,890 880 7,378 36,235 626 (23,375) 21,744 $ 43,269 $ $ 2,440 150 2,587 1,641 1,623 8,441 1,312 1,251 835 817 2,095 473 6,783 2,701 6,903 2,045 1,403 1,687 29,963 5,055 3,235 33 567 8,890 1,314 2,231 608 878 5,983 33,468 (1,291) (22,118) 16,920 $ 29,963 THE COCA-COLA COMPANY AND SUBSIDIARIES Year Ended December 31, (In millions) vi a CONSOLIDATED STATEMENTS OF CASH FLOWS 2006 2007 is ou st rs ud eH y er res o. ou co rc m e Th https://www.coursehero.com/file/16295936/coca-cola/ 5,981 1,163 313 109 (452) 9 (244) 166 99 6 7,150 $ as s ha re d $ w OPERATING ACTIVITIES Net income Depreciation and amortization Stock-based compensation expense Deferred income taxes Equity income or loss, net of dividends Foreign currency adjustments Gains on issuances of stock by equity investees Gains on sales of assets, including bottling interests Other operating charges Other items Net change in operating assets and liabilities Net cash provided by operating activities INVESTING ACTIVITIES Acquisitions and investments, principally beverage and bottling companies Purchases of other investments Proceeds from disposals of other investments Purchases of property, plant and equipment Proceeds from disposals of property, plant and equipment Other investing activities Net cash used in investing activities FINANCING ACTIVITIES Issuances of debt Payments of debt Issuances of stock Purchases of stock for treasury Dividends Net cash provided by (used in) financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS Net increase (decrease) during the year Balance at beginning of year Balance at end of year $ 5,080 938 324 (35) 124 52 (303) 159 233 (615) 5,957 2005 $ 4,872 932 324 (88) (446) 47 (23) (9) 85 299 430 6,423 (5,653) (99) 448 (1,648) 239 (6) (6,719) (901) (82) 640 (1,407) 112 (62) (1,700) (637) (53) 33 (899) 88 (28) (1,496) 9,979 (5,638) 1,619 (1,838) (3,149) 973 249 617 (2,021) 148 (2,416) (2,911) (6,583) 65 178 (2,460) 230 (2,055) (2,678) (6,785) (148) 1,653 2,440 4,093 (2,261) 4,701 2,440 (2,006) 6,707 4,701 $ $ THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3: BOTTLING INVESTMENTS Coca-Cola Enterprises Inc. CCE is a marketer, producer and distributor of bottle and can nonalcoholic beverages, operating in eight countries. As of December 31, 2007, our Company owned approximately 35 percent of the outstanding common stock of CCE. We account for our investment by the equity method of accounting and, therefore, our net income includes our proportionate share of income resulting from our investment in CCE. As of December 31, 2007, our proportionate share of the net assets of CCE exceeded our investment by approximately $337 million. This difference is not amortized. A summary of financial information for CCE is as follows (in millions): Year Ended December 31, December 31, 2007 $ $ $ $ 2006 20,936 12,955 7,981 1,470 711 $ $ $ $ 19,804 12,067 7,737 (1,495 ) (1,143 ) sh is ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m Net operating revenues Cost of goods sold Gross profit Operating income (loss) Net income (loss) 2005 $ 18,743 11,258 7,485 1,431 514 $ $ $ 2007 Current assets Noncurrent assets Total assets Current liabilities Noncurrent liabilities Total liabilities Shareowners' equity Company equity investment $ $ $ $ $ $ 4,092 19,954 24,046 5,343 13,014 18,357 5,689 1,637 2006 $ 3,802 19,564 23,366 3,924 14,916 18,840 4,526 1,312 $ $ $ $ $ A summary of our significant transactions with CCE is as follows (in millions): Year Ended December 31, Concentrate, syrup and finished product sales to CCE Syrup and finished product purchases from CCE CCE purchases of sweeteners through our Company Marketing payments made by us directly to CCE Marketing payments made to third parties on behalf of CCE Local media and marketing program reimbursements from CCE Payments made to CCE for dispensing equipment repair services Other paymentsnet 2007 $ 5,948 410 326 636 123 299 78 102 2006 $ 5,378 415 274 514 113 279 74 99 2005 $ 5,125 428 275 482 136 245 70 81 Th Syrup and finished product purchases from CCE represent purchases of fountain syrup in certain territories that have been resold by our Company to major customers and purchases of bottle and can products. Marketing payments made by us directly to CCE represent support of certain marketing activities and our participation with CCE in cooperative advertising and other marketing activities to promote the sale of Company trademark products within CCE territories. These programs are agreed to on an annual basis. Marketing payments made to third parties on behalf of CCE represent support of certain marketing activities and programs to promote the sale of Company trademark products within CCE's territories in conjunction with certain of CCE's customers. Pursuant to cooperative advertising and trade agreements with CCE, we received funds from CCE for local media and marketing program reimbursements. Payments made to CCE for dispensing equipment repair services represent reimbursement to CCE for its costs of parts and labor for repairs on cooler, dispensing, or post-mix equipment owned by us or our customers. The Other paymentsnet line in the table above represents payments made to and received from CCE that are individually not significant. If valued at the December 31, 2007 quoted closing price of CCE shares, the fair value of our investment in CCE would have exceeded our carrying value by approximately $2.8 billion. https://www.coursehero.com/file/16295936/coca-cola/ NOTE 3: BOTTLING INVESTMENTS (Continued) Other Equity Method Investments Our other equity method investments include our ownership interests in Coca-Cola Hellenic, Coca-Cola FEMSA and Coca-Cola Amatil. As of December 31, 2007, we owned approximately 23 percent, 32 percent and 30 percent, respectively, of these companies' common shares. Operating results include our proportionate share of income (loss) from our equity method investments. As of December 31, 2007, our investment in our equity method investees in the aggregate, other than CCE, exceeded our proportionate share of the net assets of these equity method investees by approximately $1,122 million. This difference is not amortized. A summary of financial information for our equity method investees in the aggregate, other than CCE, is as follows (in millions): Year Ended December 31, 2007 Net operating revenues Cost of goods sold Gross profit Operating income Net income (loss) Net income (loss) available to common shareowners $ $ $ $ 2006 28,112 16,003 12,109 3,369 1,868 1,868 $ $ $ $ $ 2005 24,990 14,717 10,273 2,697 1,475 1,455 $ sh is ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m December 31, $ 24,389 14,141 10,248 2,669 1,501 1,477 $ $ $ $ 2007 Current assets Noncurrent assets Total assets Current liabilities Noncurrent liabilities Total liabilities Shareowners' equity Company equity investment $ $ $ $ $ $ 10,159 24,682 34,841 8,587 10,360 18,947 15,894 5,652 2006 $ 8,735 21,755 30,490 7,839 9,777 17,616 12,874 4,998 $ $ $ $ $ If valued at the December 31, 2007, quoted closing prices of shares actively traded on stock markets, the value of our equity method investments in publicly traded bottlers other than CCE would have exceeded our carrying value by approximately $5.8 billion. NOTE 11: FINANCIAL INSTRUMENTS Certain Debt and Marketable Equity Securities Investments in debt and marketable equity securities, other than investments accounted for by the equity method, are categorized as trading, available-for-sale or held-to-maturity. Our marketable equity investments are categorized as trading or available-for-sale with their cost basis determined by the specific identification method. Trading securities are carried at fair value with realized and unrealized gains and losses included in net income. We record available-for-sale instruments at fair value, with unrealized gains and losses, net of deferred income taxes, reported as a component of AOCI. Debt securities categorized as held-to-maturity are stated at amortized cost. As of December 31, 2007 and 2006, trading, available-for-sale and held-to-maturity securities consisted of the following (in millions): Th Gross Unrealized 2007 Trading securities: Equity securities Other securities Cost $ 90 12 102 $ $ $ 235 17 252 $ 67 $ Available-for-sale securities: Equity securities Other securities Held-to-maturity securities: Bank and corporate debt https://www.coursehero.com/file/16295936/coca-cola/ Gains $ 2 2 $ $ $ 247 247 $ $ Estimated Fair Value Losses (3) (3) $ $ $ (2) (2) $ 482 15 497 $ $ 67 $ $ 92 9 101 NOTE 11: FINANCIAL INSTRUMENTS (Continued) Estimated Fair Value Gross Unrealized Cost 2006 Trading securities: Equity securities Available-for-sale securities: Equity securities Other securities Held-to-maturity securities: Bank and corporate debt Gains Losses $ 60 $ 6 $ $ 66 $ $ $ (1 ) (1 ) $ $ 219 219 $ $ 240 13 253 $ 458 13 471 $ 83 $ $ $ 83 sh is ar stu ed d vi y re aC s o ou urc rs e eH w er as o. co m As of December 31, 2007 and 2006, these investments were included in the following captions (in millions): Availablefor-Sale Securities Trading Securities 2007 Cash and cash equivalents Current marketable securities Cost method investments, principally bottling companies Other assets $ 101 101 $ $ 113 369 15 497 $ $ 66 66 $ $ 66 1 67 $ Availablefor-Sale Securities Trading Securities 2006 Cash and cash equivalents Current marketable securities Cost method investments, principally bottling companies Other assets Held-toMaturity Securities $ 83 372 16 471 $ Held-toMaturity Securities $ $ 82 1 83 The contractual maturities of these investments as of December 31, 2007 were as follows (in millions): Available-for-Sale Securities Trading Securities Cost Th 2008 2009-2012 2013-2017 After 2017 Equity securities $ $ 2 $ 2 5 3 90 102 $ Fair Value 1 2 3 3 92 101 Fair Value Cost $ $ 2 15 235 252 Held-to-Maturity Securities Amortized Cost $ $ 2 13 482 497 $ $ 67 67 For the years ended December 31, 2007, 2006 and 2005, gross realized gains and losses on sales of trading and available-for-sale securities were not material. The cost of securities sold is based on the specific identification method. https://www.coursehero.com/file/16295936/coca-cola/ Powered by TCPDF (www.tcpdf.org) $ $ Fair Value 67 67