Financial Reporting and Analysis BYP3-1 FINANCIAL REPORTING PROBLEM:Tootsie Roll Industries Inc. The financial statements ofTootsie Rollin AppendixAat the back of this book contain the following selected accounts, all in thousands of dollars. Common Stock $ 24,862 Accounts Payable 9,140 Accounts Receivable 37,512 Selling, Marketing, and Administrative Expenses 103,755 Prepaid Expenses 8,562 Net Property, Plant, and Equipment 220,721 Net Product Sales 495,592 Instructions (a) What is the increase and decrease side for each account? What is the normal balance for each account? (b) Identify the probable other account in the transaction and the effect on that account when: 1. Accounts Receivable is decreased. 2. Accounts Payable is decreased. 3. Prepaid Expenses is increased. (c) Identify the other account(s) that ordinarily would be involved when: 1. Interest Expense is increased. 2. Property, Plant, and Equipment is increased. BYP3-2 COMPARATIVE ANALYSIS PROBLEM:Tootsie Roll vs. Hershey The financial statements ofThe Hershey Companyappear in AppendixB, following the financial statements forTootsie Rollin AppendixA. Instructions (a) Based on the information contained in these financial statements, determine the normal balance for: Tootsie Roll Industries The Hershey Company 1. Accounts Receivable 2. Net Property, Plant, and Equipment 3. Accounts Payable 4. Retained Earnings 5. Net Product Sales 1. Inventories 2. Provision for Income Taxes 3. Accrued Liabilities 4. Common Stock 5. Interest Expense (b) Identify the other account ordinarily involved when: 1. Accounts Receivable is increased. 2. Notes Payable is decreased. 3. Machinery is increased. 4. Interest Revenue is increased.

Financial Reporting and Analysis

BYP4-1

FINANCIAL REPORTING PROBLEM:Tootsie Roll Industries, Inc. The financial statements ofTootsie Rollare presented in AppendixA Instructions (a) Using the consolidated income statement and balance sheet, identify items that may result in adjusting entries for deferrals. (b) Using the consolidated income statement, identify two items that may result in adjusting entries for accruals. (c) What was the amount of depreciation expense for 2009 and 2008? (You will need to examine the notes to the financial statements or the statement of cash flows.) Where was accumulated depreciation reported? (d) What was the cash paid for income taxes during 2009, reported at the bottom of the consolidated statement of cash flows? What was income tax expense (provision for income taxes) for 2009?

BYP4-2

COMPARATIVE ANALYSIS PROBLEM:Tootsie Roll vs. Hershey The financial statements ofThe Hershey Companyare presented in AppendixB, following the financial statements forTootsie Rollin AppendixA. Instructions (a) Identify two accounts on Hershey’s balance sheet that provide evidence that Hershey uses accrual accounting. In each case, identify the income statement account that would be affected by the adjustment process. (b) Identify two accounts on Tootsie Roll’s balance sheet that provide evidence that Tootsie Roll uses accrual accounting (different from the two you listed for Hershey). In each case, identify the income statement account that would be affected by the adjustment process.

Appendix A

The standard set of financial statements consists of: (1) a comparative income statement for three years, (2) a comparative balance sheet for two years, (3) a comparative statement of cash flows for three years, (4) a statement of retained earnings (or stockholders’ equity) for three years, and (5) a set of accompanying notes that are considered an integral part of the financial statements. The auditor’s report, unless stated otherwise, covers the financial statements and the accompanying notes. The financial statements and accompanying notes plus some supplementary data and analyses forTootsie Roll Industriesfollow.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION