The financial statements of Coca-Cola are presented in Appendix C.

The financial statements of PepsiCo are presented in Appendix D.

The companies' annual reports, including the notes to the financial statements, are available online.

Use the companies' financial information to answer the following questions.

Collapse question part

(a1)

What amounts for intangible assets were reported in their respective balance sheets by Coca-Cola and PepsiCo at year-end 2017? (Enter the amounts in millions.)

Coca-Cola PepsiCo

Intangible assets $

$

AppendixC

Specimen Financial Statements: The Coca-Cola Company

The Coca-Cola Company is the world's largest beverage company. It owns or licenses and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages, but also a variety of still beverages such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks. Finished beverage products bearing Coca-Cola trademarks, sold in the United States since 1886, are now available in more than 200 countries.

THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31,

2017

2016

2015

(In millions except per share data)

NET OPERATING REVENUES

$35,410

$41,863

$44,294

Cost of goods sold

13,256

16,465

17,482

GROSS PROFIT

22,154

25,398

26,812

Selling, general and administrative expenses

12,496

15,262

16,427

Other operating charges

2,157

1,510

1,657

OPERATING INCOME

7,501

8,626

8,728

Interest income

677

642

613

Interest expense

841

733

856

Equity income (loss) net

1,071

835

489

Other income (loss) net

(1,666)

(1,234)

631

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

6,742

8,136

9,605

Income taxes from continuing operations

5,560

1,586

2,239

NET INCOME FROM CONTINUING OPERATIONS

1,182

6,550

7,366

Income from discontinued operations (net of income taxes of $47, $0 and $0, respectively)

101

CONSOLIDATED NET INCOME

1,283

6,550

7,366

Less: Net income attributable to noncontrolling interests

35

23

15

NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY

$ 1,248

$ 6,527

$ 7,351

Basic net income per share from continuing operations1

$ 0.28

$ 1.51

$ 1.69

Basic net income per share from discontinued operations2

0.02

BASIC NET INCOME PER SHARE

$ 0.29 3

$ 1.51

$ 1.69

Diluted net income per share from continuing operations1

$ 0.27

$ 1.49

$ 1.67

Diluted net income per share from discontinued operations2

0.02

DILUTED NET INCOME PER SHARE

$ 0.29

$ 1.49

$ 1.67

AVERAGE SHARES OUTSTANDING BASIC

4,272

4,317

4,352

Effect of dilutive securities

52

50

53

AVERAGE SHARES OUTSTANDING DILUTED

4,324

4,367

4,405

1 Calculated based on net income from continuing operations less net income from continuing operations attributable to noncontrolling interests.2 Calculated based on net income from discontinued operations less net income from discontinued operations attributable to noncontrolling interests.3 Per share amounts do not add due to rounding.

Refer to Notes to Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31,

2017

2016

2015

(In millions)

CONSOLIDATED NET INCOME

$1,283

$6,550

$7,366

Other comprehensive income:

Net foreign currency translation adjustment

861

(626)

(3,959)

Net gain (loss) on derivatives

(433)

(382)

142

Net unrealized gain (loss) on available-for-sale securities

188

17

(684)

Net change in pension and other benefit liabilities

322

(53)

86

TOTAL COMPREHENSIVE INCOME (LOSS)

2,221

5,506

2,951

Less: Comprehensive income (loss) attributable to noncontrolling interests

73

10

(3)

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY

$2,148

$5,496

$2,954

THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

December 31,

2017

2016

(In millions except par value)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$ 6,006

$ 8,555

Short-term investments

9,352

9,595

TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

15,358

18,150

Marketable securities

5,317

4,051

Trade accounts receivable, less allowances of $477 and $466, respectively

3,667

3,856

Inventories

2,655

2,675

Prepaid expenses and other assets

2,000

2,481

Assets held for sale

219

2,797

Assets held for sale discontinued operations

7,329

TOTAL CURRENT ASSETS

36,545

34,010

EQUITY METHOD INVESTMENTS

20,856

16,260

OTHER INVESTMENTS

1,096

989

OTHER ASSETS

4,560

4,248

PROPERTY, PLANT AND EQUIPMENT net

8,203

10,635

TRADEMARKS WITH INDEFINITE LIVES

6,729

6,097

BOTTLERS' FRANCHISE RIGHTS WITH INDEFINITE LIVES

138

3,676

GOODWILL

9,401

10,629

OTHER INTANGIBLE ASSETS

368

726

TOTAL ASSETS

$87,896

$87,270

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable and accrued expenses

$ 8,748

$ 9,490

Loans and notes payable

13,205

12,498

Current maturities of long-term debt

3,298

3,527

Accrued income taxes

410

307

Liabilities held for sale

37

710

Liabilities held for sale discontinued operations

1,496

TOTAL CURRENT LIABILITIES

27,194

26,532

LONG-TERM DEBT

31,182

29,684

OTHER LIABILITIES

8,021

4,081

DEFEREED INCOME TAXES

2,522

3,753

THE COCA-COLA COMPANY SHAREOWNERS' EQUITY

Common stock, $0.25 par value; Authorized 11,200 shares;

Issued 7,040 and 7,040 shares, respectively

1,760

1,760

Capital surplus

15,864

14,993

Reinvested earnings

60,430

65,502

Accumulated other comprehensive income (loss)

(10,305)

(11,205)

Treasury stock, at cost 2,781 and 2,752 shares, respectively

(50,677)

(47,988)

EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY

17,072

23,062

EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS

1,905

158

TOTAL EQUITY

18,977

23,220

TOTAL LIABILITIES AND EQUITY

$87,896

$87,270

Refer to Notes to Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

2017

2016

2015

(In millions)

OPERATING ACTIVITIES

Consolidated net income

$ 1,283

$ 6,550

$ 7,366

(Income) loss from discontinued operations

(101)

Net income from continuing operations

1,182

6,550

7,366

Depreciation and amortization

1,260

1,787

1,970

Stock-based compensation expense

219

258

236

Deferred income taxes

(1,256)

(856)

73

Equity (income) loss net of dividends

(628)

(449)

(122)

Foreign currency adjustments

281

158

(137)

Significant (gains) losses on sales of assets net

1,459

1,146

(374)

Other operating charges

1,218

647

929

Other items

(269)

(224)

744

Net change in operating assets and liabilities

3,529

(221)

(157)

Net cash provided by operating activities

6,995

8,796

10,528

INVESTING ACTIVITIES

Purchases of investments

(16,520)

(15,499)

(15,831)

Proceeds from disposals of investments

15,911

16,624

14,079

Acquisitions of businesses, equity method investments and nonmarketable securities

(3,900)

(838)

(2,491)

Proceeds from disposals of businesses, equity method investments and nonmarketable securities

3,821

1,035

565

Purchases of property, plant and equipment

(1,675)

(2,262)

(2,553)

Proceeds from disposals of property, plant and equipment

104

150

85

Other investing activities

(126)

(209)

(40)

Net cash provided by (used in) investing activities

(2,385)

(999)

(6,186)

FINANCING ACTIVITIES

Issuances of debt

29,857

27,281

40,434

Payments of debt

(28,768)

(25,615)

(37,738)

Issuances of stock

1,595

1,434

1,245

Purchases of stock for treasury

(3,682)

(3,681)

(3,564)

Dividends

(6,320)

(6,043)

(5,741)

Other financing activities

(91)

79

251

Net cash provided by (used in) financing activities

(7,409)

(6,545)

(5,113)

CASH FLOWS FROM DISCONTINUED OPERATIONS

Net cash provided by (used in) operating activities from discontinued operations

111

Net cash provided by (used in) investing activities from discontinued operations

(65)

Net cash provided by (used in) nancing activities from discontinued operations

(38)

Net cash provided by (used in) discontinued operations

8

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

242

(6)

(878)

CASH AND CASH EQUIVALENTS

Net increase (decrease) during the year

(2,549)

1,246

(1,649)

Balance at beginning of year

8,555

7,309

8,958

Balance at end of year

$ 6,006

$ 8,555

$ 7,309

Refer to Notes to Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY

Year Ended December 31,

2017

2016

2015

(In millions except per share data)

EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY

NUMBER OF COMMON SHARES OUTSTANDING

Balance at beginning of year

4,288

4,324

4,366

Treasury stock issued to employees related to stock compensation plans

53

50

44

Purchases of stock for treasury

(82)

(86)

(86)

Balance at end of year

4,259

4,288

4,324

COMMON STOCK

$ 1,760

$ 1,760

$ 1,760

CAPITAL SURPLUS

Balance at beginning of year

14,993

14,016

13,154

Stock issued to employees related to stock compensation plans

655

589

532

Tax benefit (charge) from stock compensation plans

130

94

Stock-based compensation expense

219

258

236

Other activities

(3)

Balance at end of year

15,864

14,993

14,016

REINVESTED EARNINGS

Balance at beginning of year

65,502

65,018

63,408

Net income attributable to shareowners of The Coca-Cola Company

1,248

6,527

7,351

Dividends (per share $1.48, $1.40 and $1.32 in 2017, 2016 and 2015, respectively)

(6,320)

(6,043)

(5,741)

Balance at end of year

60,430

65,502

65,018

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Balance at beginning of year

(11,205)

(10,174)

(5,777)

Net other comprehensive income (loss)

900

(1,031)

(4,397)

Balance at end of year

(10,305)

(11,205)

(10,174)

TREASURY STOCK

Balance at beginning of year

(47,988)

(45,066)

(42,225)

Treasury stock issued to employees related to stock compensation plans

909

811

696

Purchases of stock for treasury

(3,598)

(3,733)

(3,537)

Balance at end of year

(50,677)

(47,988)

(45,066)

TOTAL EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY

$17,072

$23,062

$25,554

EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS

Balance at beginning of year

$ 158

$ 210

$ 241

Net income attributable to noncontrolling interests

35

23

15

Net foreign currency translation adjustment

38

(13)

(18)

Dividends paid to noncontrolling interests

(15)

(25)

(31)

Contributions by noncontrolling interests

1

Business combinations

1,805

(3)

Deconsolidation of certain entities

(157)

(34)

Other activities

41

(4)

6

TOTAL EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS

$1,905

$ 158

$ 210

Refer to Notes to Consolidated Financial Statements.

AppendixD

Specimen Financial Statements: PepsiCo, Inc.

Pepsico, Inc. is a leading global food and beverage company with a complementary portfolio of enjoyable brands, including Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana. Through its operations, authorized bottlers, contract manufacturers, and other third parties, PepsiCo makes, markets, distributes, and sells a wide variety of convenient and enjoyable beverages, foods, and snacks, serving customers and consumers in more than 200 countries and territories.

Consolidated Statement of Income

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 27, 2017, December 28, 2016 and December 29, 2015

(in millions except per share amounts)

2017

2016

2015

Net Revenue

$ 63,525

$ 62,799

$ 63,056

Cost of sales

28,785

28,209

28,731

Gross profit

34,740

34,590

34,325

Selling, general and administrative expenses

24,231

24,805

24,613

Venezuela impairment charges

1,359

Operating Profit

10,509

9,785

8,353

Interest expense

(1,151)

(1,342)

(970)

Interest income and other

244

110

59

Income before income taxes

9,602

8,553

7,442

Provision for income taxes (See Note 5)

4,694

2,174

1,941

Net income

4,908

6,379

5,501

Less: Net income attributable to noncontrolling interests

51

50

49

Net Income Attributable to PepsiCo

$ 4,857

$ 6,329

$ 5,452

Net Income Attributable to PepsiCo per Common Share

Basic

$ 3.40

$ 4.39

$ 3.71

Diluted

$ 3.38

$ 4.36

$ 3.67

Weighted-average common shares outstanding

Basic

1,425

1,439

1,469

Diluted

1,438

1,452

1,485

Cash dividends declared per common share

$ 3.1675

$ 2.96

$ 2.7625

Consolidated Statement of Comprehensive Income

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 30, 2017, December 31, 2016 and December 26, 2015

(in millions)

2017

2016

2015

Net income

$ 4,908

$ 6,379

$ 5,501

Other comprehensive income/(loss), net of taxes:

Net currency translation adjustment

1,109

(302)

(2,827)

Net change on cash flow hedges

(36)

46

3

Net pension and retiree medical adjustments

(159)

(316)

171

Net change on securities

(68)

(24)

1

Other

16

862

(596)

(2,652)

Comprehensive income

5,770

5,783

2,849

Comprehensive income attributable to noncontrolling interests

(51)

(54)

(47)

Comprehensive Income Attributable to PepsiCo

$ 5,719

$ 5,729

$ 2,802

See accompanying notes to the consolidated financial statements.

Consolidated Statement of Cash Flows

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 30, 2017, December 31, 2016 and December 26, 2015

(in millions)

2017

2016

2015

Operating Activities

Net income

$ 4,908

$ 6,379

$ 5,501

Depreciation and amortization

2,369

2,368

2,416

Share-based compensation expense

292

284

295

Restructuring and impairment charges

295

160

230

Cash payments for restructuring charges

(113)

(125)

(208)

Charges related to the transaction with Tingyi

373

73

Venezuela impairment charges

1,359

Pension and retiree medical plan expenses

221

501

467

Pension and retiree medical plan contributions

(220)

(695)

(205)

Deferred income taxes and other tax charges and credits

619

452

78

Provisional net tax expense related to the TCJ Act

2,451

Change in assets and liabilities:

Accounts and notes receivable

(202)

(349)

(461)

Inventories

(168)

(75)

(244)

Prepaid expenses and other current assets

20

10

(50)

Accounts payable and other current liabilities

201

997

1,692

Income taxes payable

(338)

329

55

Other, net

(341)

64

(134)

Net Cash Provided by Operating Activities

9,994

10,673

10,864

Investing Activities

Capital spending

(2,969)

(3,040)

(2,758)

Sales of property, plant and equipment

180

99

86

Acquisitions and investments in noncontrolled affiliates

(61)

(212)

(86)

Reduction of cash due to Venezuela deconsolidation

(568)

Divestitures

267

85

76

Short-term investments, by original maturity:

More than three months - purchases

(18,385)

(12,504)

(4,428)

More than three months - maturities

15,744

8,399

4,111

More than three months - sales

790

Three months or less, net

2

16

3

Other investing, net

29

9

(5)

Net Cash Used for Investing Activities

(4,403)

(7,148)

(3,569)

Financing Activities

Proceeds from issuances of long-term debt

7,509

7,818

8,702

Payments of long-term debt

(4,406)

(3,105)

(4,095)

Debt redemptions

(2,504)

Short-term borrowings, by original maturity:

More than three months - proceeds

91

59

15

More than three months - payments

(128)

(27)

(43)

Three months or less, net

(1,016)

1,505

53

Cash dividends paid

(4,472)

(4,227)

(4,040)

Share repurchases - common

(2,000)

(3,000)

(5,000)

Share repurchases - preferred

(5)

(7)

(5)

Proceeds from exercises of stock options

462

465

504

Withholding tax payments on RSUs, PSUs and PEPunits converted

(145)

(130)

(151)

Other financing

(76)

(58)

(52)

Net Cash Used for Financing Activities

(4,186)

(3,211)

(4,112)

Effect of exchange rate changes on cash and cash equivalents

47

(252)

(221)

Net Increase in Cash and Cash Equivalents

1,452

62

2,962

Cash and Cash Equivalents, Beginning of Year

9,158

9,096

6,134

Cash and Cash Equivalents, End of Year

$ 10,610

$ 9,158

$ 9,096

See accompanying notes to the consolidated financial statements.

Consolidated Balance Sheet

PepsiCo, Inc. and Subsidiaries

December 30, 2017 and December 31, 2016

(in millions except per share amounts)

2017

2016

ASSETS

Current Assets

Cash and cash equivalents

$ 10,610

$ 9,158

Short-term investments

8,900

6,967

Accounts and notes receivable, net

7,024

6,694

Inventories

2,947

2,723

Prepaid expenses and other current assets

1,546

908

Total Current Assets

31,027

26,450

Property, Plant and Equipment, net

17,240

16,591

Amortizable Intangible Assets, net

1,268

1,237

Goodwill

14,744

14,430

Other nonamortizable intangible assets

12,570

12,196

Nonamortizable Intangible Assets

27,314

26,626

Investments in Noncontrolled Affiliates

2,042

1,950

Other Assets

913

636

Total Assets

$ 79,804

$ 73,490

LIABILITIES AND EQUITY

Current Liabilities

Short-term debt obligations

$ 5,485

$ 6,892

Accounts payable and other current liabilities

15,017

14,243

Total Current Liabilities

20,502

21,135

Long-Term Debt Obligations

33,796

30,053

Other Liabilities

11,283

6,669

Deferred Income Taxes

3,242

4,434

Total Liabilities

68,823

62,291

Commitments and contingencies

Preferred Stock, no par value

41

41

Repurchased Preferred Stock

(197)

(192)

PepsiCo Common Shareholders' Equity

Common stock, par value 1 per share (authorized 3,600 shares, issued, net of repurchased

common stock at par value: 1,420 and 1,428 shares, respectively)

24

24

Capital in excess of par value

3,996

4,091

Retained earnings

52,839

52,518

Accumulated other comprehensive loss

(13,057)

(13,919)

Repurchased common stock, in excess of par value (446 and 438 shares, respectively)

(32,757)

(31,468)

Total PepsiCo Common Shareholders' Equity

11,045

11,246

Noncontrolling interests

92

104

Total Equity

10,981

11,199

Total Liabilities and Equity

$ 79,804

$ 73,490

See accompanying notes to the consolidated financial statements.

Consolidated Statement of Equity

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 30, 2017, December 31, 2016 and December 26, 2015

(in millions)

2017

2016

2015

Shares

Amount

Shares

Amount

Shares

Amount

Preferred Stock

0.8

$ 41

0.8

$ 41

0.8

$ 41

Balance, beginning of year

(0.7)

(192)

(0.7)

(186)

(0.7)

(181)

Redemptions

(5)

(6)

(5)

Balance, end of year

(0.7)

(197)

(0.7)

(192)

(0.7)

(186)

Common Stock

Balance, beginning of year

1,428

24

1,448

24

1,488

25

Change in repurchased common stock

(8)

(20)

(40)

(1)

Balance, end of year

1,420

24

1,428

24

1,448

24

Capital in Excess of Par Value

Balance, beginning of year

4,091

4,076

4,115

Share-based compensation expense

290

289

299

Stock option exercises, RSUs, PSUs and PEPunits converted (a)

(236)

(138)

(182)

Withholding tax on RSUs, PSUs and PEPunits converted

(145)

(130)

(151)

Other

(4)

(6)

(5)

Balance, end of year

3,996

4,091

4,076

Retained Earnings

Balance, beginning of year

52,518

50,472

49,092

Net income attributable to PepsiCo

4,857

6,329

5,452

Cash dividends declared - common

(4,536)

(4,282)

(4,071)

Cash dividends declared - preferred

(1)

(1)

Balance, end of year

52,839

52,518

50,472

Accumulated Other Comprehensive Loss

Balance, beginning of year

(13,919)

(13,319)

(10,669)

Other comprehensive income/(loss) attributable to PepsiCo

862

(600)

(2,650)

Balance, end of year

(13,057)

(13,919)

(13,319)

Repurchased Common Stock

Balance, beginning of year

(438)

(31,468)

(418)

(29,185)

(378)

(24,985)

Share repurchases

(18)

(2,000)

(29)

(3,000)

(52)

(4,999)

Stock option exercises, RSUs, PSUs and PEPunits converted

10

708

9

712

12

794

Other

3

5

5

Balance, end of year

(446)

(32,757)

(438)

(31,468)

(418)

(29,185)

Total PepsiCo Common Shareholders' Equity

11,045

11,246

12,068

Noncontrolling Interests

Balance, beginning of year

104

107

110

Net income attributable to noncontrolling interests

51

50

49

Distributions to noncontrolling interests

(62)

(55)

(48)

Currency translation adjustment

4

(2)

Other, net

(1)

(2)

(2)

Balance, end of year

92

104

107

Total Equity

$ 10,981

$ 11,199

$ 12,030

(a) Includes total tax benefits of $110 million in 2016 and $107 million in 2015.See accompanying notes to the consolidated financial statements.