The Coca-Cola Company owns 42 percent of Coca-Cola Enterprises, the largest softdrink bottler in the world. On December 31, 1998, The Coca-Cola Company reported the following information in its financial statement footnotes:

“The excess of our equity in the underlying net assets of Coca-Cola Enterprises over our investment is primarily amortized on a straight-line basis over 40 years. The balance of this excess, net of amortization, was approximately $442 million at December 31, 1998. A summary of financial information for Coca-Cola Enterprises is as follows (in millions):

December 31, 1998 1997 Current assets $ 2,285 $ 1,813 Noncurrent assets 18,847 15,674 Total assets $21,132 $17,487 Current liabilities $3,397 $3,032 Noncurrent liabilities 15,297 12,673 Total liabilities $18,694 $15,705 Share-owners’ equity $2,438 $1,782 Company equity investment $584 $184 Operating revenues $13,414 $11,278 Cost of goods sold 8,391 7,096

“Our net concentrate/syrup sales to Coca-Cola Enterprises were $3.1 billion in 1998.
Coca-Cola Enterprises purchases sweeteners through our Company. . . . These transactions amounted to $252 million in 1998.”
Show the 1998 financial statement effects of reporting Coca-Cola Enterprises using the equity method for The Coca-Cola Company. How much control does The Coca-
Cola Company have over Coca-Cola Enterprises? Is the equity method the most appropriate method for recording this investment?AppendixLO1

Transcribed Image Text:

December 31, 1998 1997 Gross profit $5.023 $4,182 Operating income $869 $720 Net income $142 $171 Net income available to common share owners $141 $169 Company equity income $51 $59