Part 1: Trade Receivables
1. For purposes of answering the questions in this part, only consider "Trade Receivables."
a. What is the amount of Trade Receivables that customers owe Coors at the end of fiscal 2002?
b. What is the amount of Trade Receivables that Coors expects to collect as of the end of fiscal 2002?
During fiscal year 2002, Coors acquired 100% of the shares of Bass Holdings, Ltd., which they renamed Coors Brewers Limited. As part of this acquisition, Coors acquired $399 million of Trade Receivables, net of an Allowance for Doubtful Accounts of $19.4 million.
2 a. Assuming that Coors recognized a $2.2 million Provision for Doubtful Accounts in fiscal year 2002, what was the dollar amount of Trade Receivables written off during 2002?
b. What effect did this write-off have on Cash flows from operating activities in fiscal 2002? Explain.
3 a. Relative to Coors' Trade Receivables at the beginning of fiscal 2002, what is your evaluation of the credit-worthiness (e.g., collectibility) of the accounts acquired as part of the CBL acquisition? Be as specific as possible, using relevant data to support your answer.
Part II: Inventories
For purposes of answering the questions in thispart. assume a tax rate of 38% for all years.
1. What method does Coors use for tax purposes to account for its U.S. Inventories? Explain.
2. a. What is the book value of Inventories at the end of fiscal year 2002?
b. What would have been the book value of Inventories at the end of fiscal 2002 if Coors had valued all Inventories at current cost?
3. a. By their choice of inventory methods, how much has Coors postponed in taxes as of the end of fiscal 2002?
b. If Coors had valued all Inventories at current cost, would their income taxes for fiscal year 2002 have been higher or lower? By how much?
Part III: Properties
1. a. What method(s) does Coors use to depreciate Properties?
b. If Coors were to switch at the beginning of fiscal 2003 to only an accelerated depreciation method, what would be the effect on the financial statements in that year? No calculations are necessary, but be as specific as possible in your answer.
2 a. How much depreciation, depletion, and amortization expense did Coors' recognize in fiscal 2002 for its Properties?
b. What were expenditures on new Properties during fiscal 2001?
3 What is the original cost of Properties on the balance sheet at the end of fiscal 2002? Explain any observed differences between the original cost at the end of fiscal 2002 and 2001. Utilize information from question 2 above as well as other items from the financial statements to support your answer.
4. Why is the "gain on sales of properties" added back in the operating section of th statement of cash flows?
Part IV: Revenue and Expense Recognition
1. a. What is Coors' advertising expense for fiscal year 2002?
b. Is your answer to part (a) higher than, lower than, or the same as cash expenditures for advertising during fiscal year 2002? If different, by how much?
2. Assume that instead of expensing advertising, Coors capitalizes all advertising costs and expenses them in the following fiscal year (i.e, they are current assets). What would be the effect (direction and amount) on the following:
Total Assets
Stockholders' Equity
Net Income
Cash from Operations
Several beverage companies, including such big names as Coca Cola, are alleged to have shipped excessive product to distributors and recognized the revenue related to those shipments - this practice is called "channel-stuffing." In answering the following questions, assume that Coors engages in channel stuffing at the end of fiscal year 2002.
3 a. What effect does channel stuffing have on Coors' inventory balance at the end of fiscal year 2002? What will likely happen to the inventory balance at the beginning of the next fiscal year assuming constant production and demand? [No calculations are necessary - simply explain the direction of the effect.]
b. What effect does channel stuffing have on the balance of trade receivables at the end fiscal year 2002? [No calculations are necessary - simply explain the direction of the effect]
c. Assume that distributors' balance sheets contain $200 million in excess, inventory of Coors' products at December 31 2002 as a result of channel stuffing. What is the cumulative dollar effect of channel stuffing on fiscal year 2002 revenue and gross margin?