For years ended December 31Equity Investee Financial Summary,$ millions201820172016Net sales...Gross marginNet income..Cummins' share of net income.$7,352$7,050$5,6541,3731,4221,182647680499$ 336$ 308$ 260Royalty and interest income..584941Total equity, royalty and interest from investees...$ 394$ 357$ 301Current assets$3,4011,449$3,4161,379Noncurrent assetsCurrent liabilities..Noncurrent liabilities..Net assets...(2,669)(218)(2,567)(237)$1,963$1,991Cummins' share of net assets$1,144$1,116a. What assets and liabilities of unconsolidated affiliates are omitted from Cummins' balance sheet as aresult of the equity method of accounting for those investments?b. Do the liabilities of the unconsolidated affiliates affect Cummins directly? Explain.c. How does the equity method impact Cummins' ROE and its RNOA components (net operating assetturnover and net operating profit margin)?

Net sales.. Gross margin Net income. Cummins' share of net income.. $7,352 $7,050 $5,654 1,373 1,422 1,182 647 680 499 $ 336 $ 308 $ 260 Royalty and interest income.. 58 49 41 Total equity, royalty and interest from investees... $ 394 $ 357 $ 301 Current assets $3,401 1,449 $3,416 1,379 (2,567) (237) Noncurrent assets Current liabilities.. (2,669) (218) Noncurrent liabilities. Net assets... $1,963 $1,991 Cummins' share of net assets $1,144 $1,116 a. What assets and liabilities of unconsolidated affiliates are omitted from Cummins' balance sheet as a result of the equity method of accounting for those investments? b. Do the liabilities of the unconsolidated affiliates affect Cummins directly? Explain. c. How does the equity method impact Cummins' ROE and its RNOA components (net operating asset tumover and net operating profit margin)?

Net sales.. Gross margin Net income. Cummins' share of net income.. $7,352 $7,050 $5,654 1,373 1,422 1,182 647 680 499 $ 336 $ 308 $ 260 Royalty and interest income.. 58 49 41 Total equity, royalty and interest from investees... $ 394 $ 357 $ 301 Current assets $3,401 1,449 $3,416 1,379 (2,567) (237) Noncurrent assets Current liabilities.. (2,669) (218) Noncurrent liabilities. Net assets... $1,963 $1,991 Cummins' share of net assets $1,144 $1,116 a. What assets and liabilities of unconsolidated affiliates are omitted from Cummins' balance sheet as a result of the equity method of accounting for those investments? b. Do the liabilities of the unconsolidated affiliates affect Cummins directly? Explain. c. How does the equity method impact Cummins' ROE and its RNOA components (net operating asset tumover and net operating profit margin)?

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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