ACC 318 Module Three Assignment

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Feb 20, 2024

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ACC 318 Module Three Assignment Operating Activities 1. Identify the method of computing net cash provided by operating activities each company used. Using appendices C and D to evaluate the Coca-Cola Company and PepsiCo, Inc., one can determine that the net cash is computed using the indirect method for both companies. (Kieso et al., 2022) 2. Calculate the amounts of cash provided by operating activities reported by each company in 2020. Following Appendix C for the Coca-Cola Company, one can observe that the amount of cash reported in 2020 for operating activities was 9,844 million. ( Appendix C: Specimen Financial Statements: The Coca-Cola Company | Intermediate Accounting - Wiley Reader , n.d.) Looking at Appendix D for PepsiCo, Inc., one can observe that the reported operating activities for 2020 was 10,613 million. ( Appendix D: Specimen Financial Statements: PepsiCo, Inc. | Intermediate Accounting - Wiley Reader , n.d.) 3. Explain the two companies’ trends in net cash provided by operating activities over the period 2018 to 2020. Both companies show a different trend in the net cash over 2018-2020. PepsiCo, Inc. steadily increased over the three years, increasing a total of $1,198 million from 2018-2020. Between 2018 and 2019, the company increased net cash by $234 million and then increased another $934 million between 2019 and 2020. ( Appendix D: Specimen Financial Statements: PepsiCo, Inc. | Intermediate Accounting - Wiley Reader , n.d.) As for the Coca-Cola Company, their reports of net cash fluctuated over the years 2018-2020. Between 2018 and 2019, the net cash increased by $2,844 million but then decreased by $627 million over 2019-2020. Although the net cash for Coca-Cola fluctuated over the years, there was still an increase of $2,217 million between 2018 and 2020. ( Appendix C: Specimen Financial Statements: The Coca-Cola Company | Intermediate Accounting - Wiley Reader , n.d.) Investing Activities 1. Identify the most significant item in the investing activities section reported by each company in 2020. The most significant item reported in the investing activities section for Coca-Cola in 2020 is the purchase of investments for a total $13,583 million. ( Appendix C: Specimen Financial Statements: The Coca-Cola Company | Intermediate Accounting - Wiley Reader , n.d.) In PepsiCo, Inc., the acquisitions, net of cash acquired, and investments in noncontrolled affiliates are the most significant, costing a total of $$6,372 million in 2020. ( Appendix D: Specimen Financial Statements: PepsiCo, Inc. | Intermediate Accounting - Wiley Reader , n.d.) Financing Activities 1. Identify the most significant item in the financing activities section reported by each company in 2020. The Coca-Cola company’s most significant item for 2020 in the financing activities was payments of debt, which totaled $28,796 million. ( Appendix C: Specimen Financial Statements: The Coca-Cola Company | Intermediate Accounting - Wiley Reader , n.d.) For PepsiCo, Inc., the most significant item reported was the proceeds from the issuance of

long-term debt with a total of $13,809 million. ( Appendix D: Specimen Financial Statements: PepsiCo, Inc. | Intermediate Accounting - Wiley Reader , n.d.) Depreciation and Amortization 1. Identify what activity would depreciation and amortization be reported on in each company’s statement of cash flow using the indirect method. Both companies use the indirect method, which has the depreciation and amortization reported under the operating activities. 2. Explain why each company reported on depreciation and amortization where they did in their statement of cash flows. Depreciation and amortization are noncash expenses that affect the net income. To avoid an incorrect calculation of net cash flow, it must be reintroduced into net income in the statement of cash flows. (Kieso et al., 2022) 3. Identify the amount of depreciation and amortization for each company. PepsiCo, Inc. has a total of $2,548 million in depreciation and amortization for 2020, while the Coca-Cola Company has a total of $1,536 million. (Kieso et al., 2022) Statement of Cash Flows and Ratios 1. Compute the current cash debt coverage for each company. Current Cash Debt Coverage (CCDC)= Nest Cash Flow Provided By Operating Activities/Average Current Liabilities Average Current Liabilities (ACL) = Total Current Liabilities(Beginning of Yr.) + Current Liabilities( End of Yr.)/2 The Coca-Cola Company: ACL=26,973+14,601/2 ACL=41,574/2 ACL= 20,787 million CCDC= 9,844/20,787 CCDC= 0.47 PepsiCo, Inc.: ACL=20,461+23,372/2 ACL=43,833/2 ACL=21,916.5 CCDC=10,613/21,916.5 CCDC=0.48 2. Compute the cash debt coverage for each company. Cash Debt Coverage (CDC)= Net Cash Flow Provided By Operating Activities/Total Liabilities Totally Liabilities (TL)= Total Assets-Shareholders’ Equity

The Coca-Cola Company: TL=87,796-21,284 TL=66,512 CDC=9,844/66,512 CDC=0.15 The PepsiCo, Inc.: TL=92,918-13,552 TL=79,366 CDC=10,613/79,366 CDC=0.13 3. Explain what conclusions can be drawn from the current cash debt coverage ratio and the cash debt coverage ratio. Address the following questions in your response: A. What conclusions can be drawn from the current cash debt coverage ratio? The current cash debt coverage ratio is important because it provides investors and creditors with a company's liquidity and provides the efficiency of a company. Currently, both companies have low liquidity, meaning they do not have enough to cover the company’s debt. (Kieso et al., 2022) This can be determined by the ratios provided by Coca-Cola Company, 0.47, and PepsiCo, Inc., 0.48. Since both companies’ ratios fall under 1, they are making less than what it owed. B. What conclusions can be drawn from the cash debt coverage ratio? Like the current cash debt coverage ratio, the cash debt ratio provides investors and creditors with important information. This ratio informs investors and creditors about how long a company would take to repay its current debts within a given year of its operations. (Kieso et al., 2022) Both companies have a low rate of repaying liabilities, with Coca-Cola Company able to repay liabilities at a rate of 15% a year and PepsiCo, Inc. repaying liabilities at a rate of 13% a year. References Appendix C: Specimen Financial Statements: The Coca-Cola Company | Intermediate Accounting - Wiley Reader . (n.d.). Wiley Reader. https://read.wiley.com/books/9781119778899/page/39/section/top-of-page Appendix D: Specimen Financial Statements: PepsiCo, Inc. | Intermediate Accounting - Wiley Reader . (n.d.). Wiley Reader. https://read.wiley.com/books/9781119778899/page/40/section/top-of- page Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2022). Intermediate Accounting .

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