(a) What assets and liabilities of unconsolidated affiliates are omitted from Cummins's balance sheet as a result of the equity method of accounting for those investments?Assets $_____Liabilities $_______ Analyzing and Interpreting Disclosures on Equity Method InvestmentsCummins, Inc. (CMI) reports investments in affiliated companies, consisting mainly of investments in nine manufacturing joint ventures. Cummins reports those investments on its balance sheet at $734 million, andprovides the following financial information of its investee companies in a footnote to its 10-K report:As of and for the years endedDecember 31,(in millions)201020092008Net salesGross margin$ 7,107$ 5,554$ 6,6101,6511,3651,509Net incomeCummins share of net incomeRoyalty and interest incomeTotal equity, royalty and interest income from investeesCurrent assetsNoncurrent assets668$ 321427498$196$ 231301822$ 351$ 214$ 253$2,741$2,0051,2531,123Current liabilities(1,837)(1,406)Noncurrent liabilitiesNet assets(499)(390)$1,658$1,332Cummins share of net assets$ 734$ 587

ssets and liabilities are fundamental concepts in accounting and finance:Assets:Assets are resources…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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(a) What assets and liabilities of unconsolidated affiliates are omitted from Cummins's balance sheet as a result of the equity method of accounting for those investments?

Assets $_____

Liabilities $_______

Analyzing and Interpreting Disclosures on Equity Method Investments
Cummins, Inc. (CMI) reports investments in affiliated companies, consisting mainly of investments in nine manufacturing joint ventures. Cummins reports those investments on its balance sheet at $734 million, and
provides the following financial information of its investee companies in a footnote to its 10-K report:
As of and for the years ended
December 31,
(in millions)
2010
2009
2008
Net sales
Gross margin
$ 7,107
$ 5,554
$ 6,610
1,651
1,365
1,509
Net income
Cummins share of net income
Royalty and interest income
Total equity, royalty and interest income from investees
Current assets
Noncurrent assets
668
$ 321
427
498
$196
$ 231
30
18
22
$ 351
$ 214
$ 253
$2,741
$2,005
1,253
1,123
Current liabilities
(1,837)
(1,406)
Noncurrent liabilities
Net assets
(499)
(390)
$1,658
$1,332
Cummins share of net assets
$ 734
$ 587

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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