Instructions Refer to P&G\'s 2015 financial statements and the accompanying note
ID: 2445052 • Letter: I
Question
Instructions Refer to P&G's 2015 financial statements and the accompanying notes to answer the following questions.
(a) What types of investments did P&G hold, if any? In what classifications are P&G's investments reported? What valuation basis does P&G use to report its investments?
(b) How much working capital did P&G have on June 30, 2015? On June 30, 2014? Did P&G appear to be in good financial health? Explain.
(c) Which method of computing net cash provided by operating activities does P&G use? What was the most significant item in the cash flows used for the investing activities section in 2015? What was the most significant item in the cash flows used for the financing activities section in 2015?
(d) P&G reports no allowance for doubtful accounts, suggesting that bad debt expense is not material for this company. Is it reasonable that a company like P&G would not have material bad debt expense? Explain.
Explanation / Answer
Answer
(a) Types of investments did P&G hold: P&G hold Investment securities consist of readily marketable debt and equity securities
Classification Of P&G investment: Investment available for sale any Unrealized gains or losses on securities classified as available-for-sale are generally recorded in OCI
valuation basis does P&G use to report its investments: cost method of accounting
(b) Working Capital: June 30, 2015 - Current Assets - Current Liab = 29646 - 29790 = -144
June 30, 2014 - Current Assets - Current Liab = 31617 - 33726 = -2109
It appear that company has bad financial health in comparision to 2014
(c) method of computing net cash provided by operating activities: Indirect Method
(investing activity)
Company has incurred huge capital expenditure amounting $3736 & short term investment amounting $3647 also proceeds from sale 4497
(financing activity)
Company has distributed dividend amounting $7287 & repayment of debt amounting $3512 (long term) $2580 (short term)
(d) P&G reports no allowance for doubtful accounts bcz from past analysis it is observed that company does not suffer from the problem of bed debts, so it is correct to not make any provision regarding doubtful debts.