P4-6 (Retained Earnings Statement, Prior Period Adjustment) Belowis the Retained Earnings account for the year 2012 for AcadianCorp.
Retained earnings, January 1, 2012 $257,600
Add:
Gain on sale of investments (net of tax) $41,200
Net income 84,500
Refund on litigation with government, related to the year 2009 (netof tax) 21,600
Recognition of income earned in 2011, but omitted from incomestatement
in that year (net of tax) 25,400 172,700
430,300
Deduct:
Loss on discontinued operations (net of tax) 35,000
Write-off of goodwill (net of tax) 60,000
Cumulative effect on income of prior years in changing from LIFO toFIFO
inventory valuation in 2012 (net of tax) 23,200
Cash dividends declared 32,000 150,200
Retained earnings, December 31, 2012 $280,100
Instructions
Retained earnings, January 1, 2012 $257,600
Add:
Gain on sale of investments (net of tax) $41,200
Net income 84,500
Refund on litigation with government, related to the year 2009 (netof tax) 21,600
Recognition of income earned in 2011, but omitted from incomestatement
in that year (net of tax) 25,400 172,700
430,300
Deduct:
Loss on discontinued operations (net of tax) 35,000
Write-off of goodwill (net of tax) 60,000
Cumulative effect on income of prior years in changing from LIFO toFIFO
inventory valuation in 2012 (net of tax) 23,200
Cash dividends declared 32,000 150,200
Retained earnings, December 31, 2012 $280,100
Instructions
Related questions
Income statements and balance sheets follow for The New YorkTimes Company. Refer to these financial statements to answer therequirements.
| The New York Times Company Consolidated Statements of Income | ||
Fiscal year ended | ||
(in thousands) | Dec. 29, 2013 | Dec. 30, 2012 |
Operating revenues | ||
Circulation | $ 824,277 | $ 795,037 |
Advertising | 666,687 | 711,829 |
Other | 86,266 | 88,475 |
Total revenues | 1,577,230 | 1,595,341 |
Production Costs | ||
Raw materials | 92,886 | 106,381 |
Wages and benefits | 332,085 | 331,321 |
Other | 201,942 | 213,616 |
Total production costs | 626,913 | 651,318 |
Selling, general and administrative expenses | 706,354 | 711,112 |
Depreciation and amortization | 78,477 | 78,980 |
Total operating costs | 1,411,744 | 1,441,410 |
Pension settlement expense | 3,228 | 47,657 |
Multiemployer pension plan withdrawal expense | 6,171 | 0 |
Other expense | 0 | 2,620 |
Operating profit | 156,087 | 103,654 |
Gain on sale of investments | 0 | 220,275 |
Impairment of investments | 0 | 5,500 |
(Loss)/income from joint ventures | (3,215) | 2,936 |
Premium on debt redemption | 0 | 0 |
Interest expense, net | 58,073 | 62,808 |
Income from continuing operations before income taxes | 94,799 | 258,557 |
Income tax expense | 37,892 | 94,617 |
Income from continuing operations | 56,907 | 163,940 |
Discontinued operations: | ||
(Loss) from discontinued operations, net of tax | (20,413) | (113,447) |
Gain on sale, net of tax | 28,362 | 85,520 |
Income/(loss) from discontinued operations, net of tax | 7,949 | (27,927) |
Net income/(loss) | 64,856 | 136,013 |
Net (income)/loss attributable to the noncontrollinginterest | 249 | (166) |
Net income/(loss) attributable to New York Times Company commonstockholders | 65,105 | 135,847 |
| The New York Times Company Consolidated Balance Sheets | ||
As of | ||
(in thousands) | Dec. 29, 2013 | Dec. 30, 2012 |
Cash and cash equivalents | $ 482,745 | $ 820,490 |
Short-term investments | 364,880 | 134,820 |
Accounts receivable, net | 202,303 | 197,589 |
Deferred income taxes | 65,859 | 58,214 |
Prepaid assets | 20,250 | 23,085 |
Other current assets | 36,230 | 26,320 |
Assets held for sale | 0 | 137,050 |
Total current assets | 1,172,267 | 1,397,568 |
Long-term marketable securities | 176,155 | 4,444 |
Investments in joint ventures | 40,213 | 40,872 |
Property plant and equipment, net | 713,356 | 773,469 |
Goodwill, net | 125,871 | 122,691 |
Deferred income taxes | 179,989 | 302,212 |
Miscellaneous assets | 164,701 | 166,214 |
Total assets | $2,572,552 | $2,807,470 |
Accounts payable | $ 90,982 | $ 88,990 |
Accrued payroll and other related liabilities | 91,629 | 86,772 |
Unexpired subscriptions | 58,007 | 57,336 |
Accrued expenses | 107,755 | 118,753 |
Accrued incomes taxes | 138 | 38,932 |
Liabilities held for sale | 0 | 32,373 |
Total current liabilities | 348,511 | 423,156 |
Long-term debt and capital lease obligations | 684,142 | 696,752 |
Pension benefits obligation | 444,328 | 737,889 |
Postretirement benefits obligation | 90,602 | 110,347 |
Other | 158,435 | 173,690 |
Total other liabilities | 1,377,507 | 1,718,678 |
Stockholdersâ equity | ||
Common stock of $0.10 par value: | ||
Class A common stock | 15,129 | 15,027 |
Class B convertible | 82 | 82 |
Additional paid-in capital | 33,045 | 25,610 |
Retained earnings | 1,283,518 | 1,230,450 |
Common stock held in treasury, at cost | (86,253) | (96,278) |
Accumulated other comprehensive income loss), net of tax | (402,611) | (512,566) |
Total New York Times Company stockholdersâ equity | 842,910 | 662,325 |
Noncontrolling interest | 3,624 | 3,311 |
Total stockholdersâ equity | 846,534 | 665,636 |
Total liabilities and stockholdersâ equity | $2,572,552 | $2,807,470 |
Required:
a. Compute net operating profit after tax (NOPAT)for 2013 and 2012. Assume that combined federal and state statutorytax rates are 37% for both years.
b. Compute net operating assets (NOA) for 2013 and2012.
c. Compute return on net operating assets (RNOA)for 2013 and 2012. Net operating assets are $412,630 thousand in2011.
d. Compute return on common shareholders equity(ROE) for 2013 and 2012. Stockholdersâ equity attributable to NewYork Times Company in 2011 is $506,360 thousand.
e. What is nonoperating return component of ROE for2013 and 2012?
f. Comment on the difference between ROE and RNOA.What inference do you draw from this comparison?
Income statements and balance sheets follow for The New YorkTimes Company. Refer to these financial statements to answer therequirements.
| The New York Times Company Consolidated Statements of Income | ||
Fiscal year ended | ||
(in thousands) | Dec. 29, 2013 | Dec. 30, 2012 |
Operating revenues | ||
Circulation | $ 824,277 | $ 795,037 |
Advertising | 666,687 | 711,829 |
Other | 86,266 | 88,475 |
Total revenues | 1,577,230 | 1,595,341 |
Production Costs | ||
Raw materials | 92,886 | 106,381 |
Wages and benefits | 332,085 | 331,321 |
Other | 201,942 | 213,616 |
Total production costs | 626,913 | 651,318 |
Selling, general and administrative expenses | 706,354 | 711,112 |
Depreciation and amortization | 78,477 | 78,980 |
Total operating costs | 1,411,744 | 1,441,410 |
Pension settlement expense | 3,228 | 47,657 |
Multiemployer pension plan withdrawal expense | 6,171 | 0 |
Other expense | 0 | 2,620 |
Operating profit | 156,087 | 103,654 |
Gain on sale of investments | 0 | 220,275 |
Impairment of investments | 0 | 5,500 |
(Loss)/income from joint ventures | (3,215) | 2,936 |
Premium on debt redemption | 0 | 0 |
Interest expense, net | 58,073 | 62,808 |
Income from continuing operations before income taxes | 94,799 | 258,557 |
Income tax expense | 37,892 | 94,617 |
Income from continuing operations | 56,907 | 163,940 |
Discontinued operations: | ||
(Loss) from discontinued operations, net of tax | (20,413) | (113,447) |
Gain on sale, net of tax | 28,362 | 85,520 |
Income/(loss) from discontinued operations, net of tax | 7,949 | (27,927) |
Net income/(loss) | 64,856 | 136,013 |
Net (income)/loss attributable to the noncontrollinginterest | 249 | (166) |
Net income/(loss) attributable to New York Times Company commonstockholders | 65,105 | 135,847 |
| The New York Times Company Consolidated Balance Sheets | ||
As of | ||
(in thousands) | Dec. 29, 2013 | Dec. 30, 2012 |
Cash and cash equivalents | $ 482,745 | $ 820,490 |
Short-term investments | 364,880 | 134,820 |
Accounts receivable, net | 202,303 | 197,589 |
Deferred income taxes | 65,859 | 58,214 |
Prepaid assets | 20,250 | 23,085 |
Other current assets | 36,230 | 26,320 |
Assets held for sale | 0 | 137,050 |
Total current assets | 1,172,267 | 1,397,568 |
Long-term marketable securities | 176,155 | 4,444 |
Investments in joint ventures | 40,213 | 40,872 |
Property plant and equipment, net | 713,356 | 773,469 |
Goodwill, net | 125,871 | 122,691 |
Deferred income taxes | 179,989 | 302,212 |
Miscellaneous assets | 164,701 | 166,214 |
Total assets | $2,572,552 | $2,807,470 |
Accounts payable | $ 90,982 | $ 88,990 |
Accrued payroll and other related liabilities | 91,629 | 86,772 |
Unexpired subscriptions | 58,007 | 57,336 |
Accrued expenses | 107,755 | 118,753 |
Accrued incomes taxes | 138 | 38,932 |
Liabilities held for sale | 0 | 32,373 |
Total current liabilities | 348,511 | 423,156 |
Long-term debt and capital lease obligations | 684,142 | 696,752 |
Pension benefits obligation | 444,328 | 737,889 |
Postretirement benefits obligation | 90,602 | 110,347 |
Other | 158,435 | 173,690 |
Total other liabilities | 1,377,507 | 1,718,678 |
Stockholdersâ equity | ||
Common stock of $0.10 par value: | ||
Class A common stock | 15,129 | 15,027 |
Class B convertible | 82 | 82 |
Additional paid-in capital | 33,045 | 25,610 |
Retained earnings | 1,283,518 | 1,230,450 |
Common stock held in treasury, at cost | (86,253) | (96,278) |
Accumulated other comprehensive income loss), net of tax | (402,611) | (512,566) |
Total New York Times Company stockholdersâ equity | 842,910 | 662,325 |
Noncontrolling interest | 3,624 | 3,311 |
Total stockholdersâ equity | 846,534 | 665,636 |
Total liabilities and stockholdersâ equity | $2,572,552 | $2,807,470 |
a. Compute net operating profit after tax (NOPAT)for 2013 and 2012. Assume that combined federal and state statutorytax rates are 37% for both years.
b. Compute net operating assets (NOA) for 2013 and2012.
c. Compute return on net operating assets (RNOA)for 2013 and 2012. Net operating assets are $412,630 thousand in2011.
d. Compute return on common shareholders equity(ROE) for 2013 and 2012. Stockholdersâ equity attributable to NewYork Times Company in 2011 is $506,360 thousand.
e. What is nonoperating return component of ROE for2013 and 2012?
f. Comment on the difference between ROE and RNOA.What inference do you draw from this comparison?
