FIN 3513-001
LOGITECH INTERNATIONAL S.A.
by
Jeffrey Chan
Ioulia Miasnikova
Omar Mussa
Chandra Raharja
1. Using the Consolidated Balance Sheets for Logitech International S.A. (Logitech) for March 31, 2010 and 2009, prepare a common-size balance sheet.
2. Evaluate the asset, debt, and equity structure of Logitech, and explain trends and changes found on the common-size balance sheet. Logitech’s total assets changed from $1,421,530,000 in 2009 to $1,599,678,000 in 2010, with an increasing growth rate of 12.53%. However, Logitech lowered its liquidity level by decreasing the cash and cash equivalents, account receivable, inventory, and other current assets, for which the company would have a higher
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4. What inventory method is used to value inventories? Does this method reflect current cost at year-end?
The company uses FIFO inventory method (first in, first out) to value inventory. This method assumes that the first unit making its way into inventory is the first sold. It means that the goods that were most recently purchased are still in inventory. Cost of goods sold (COGS) = (Beginning inventory + Purchases) – Ending inventory. The costs are chronologically charged to cost of goods sold (COGS) i.e., the first costs incurred are first costs charged to cost of goods sold (COGS). This explains why Logitech’s Inventories are stated at the lower of cost of market, taking into consideration the nature of products such as PC components, gaming products, wireless devices that become obsolete fast enough or exceed the market’s demand.
5. Discuss the commitments and contingencies of Logitech and the significance of these items.
The caption commitment and contingencies that appears near the end of consolidated Balance Sheet has no amount and directs a reader's attention to the disclosures included in the footnotes. An amount is purposely not shown for a number of reasons. For example, the company’s lease/rent expenses grew from $13.8 mill in 2008 to $16.3 mill in 2010, yet asset retirement obligations for its leased facilities as of March 31, 2010 were not
Furthermore, according to the 2016 Annual Report, Woolworths’ cost of inventories is determined on a weighted average basis. The weighted average method is perceived to assume that items are of similar nature (Carlon et al. 2016). This method would lead to identical goods being allocated to the same price using the weighted average unit cost, which can then be applied to calculate the cost of ending inventory (Carlon et al. 2016). For this particular case, Woolworths Limited, as a commercial entity, regards the cost of inventory to be difficult to measure due to the high turnover rates and accessibility costs of different products.
Inventory Method: The inventory amount for the year ended 12/31/2016 is $14,760,000,000 which is an $759,000,000 increase from the previous year. CVS uses the lesser of the weighted average cost or market value when determining the value of inventory. Inventory is verified for accuracy by regularly doing physical counts in all locations. Between physical counts, CVS uses sales results from previous years to accrue the estimated physical loss. These estimates are determined for each individual store and warehouse separately to ensure the most accurate information possible is reported. CVS has decided to use a new method available after annual periods beginning after 12/15/2016 known as the lower of cost and net realizable value to replace using
Agro-Chem, Inc. is a regional producer of agricultural chemicals based in Houston Texas that needs help making a lease versus purchase decision. By understanding the material presented, we will be able to come to a decision. However, after reviewing the information presented, there are a few problems that need to be investigated before finalizing our recommendation. Agro-Chem, Inc. chose to go with the financial manager’s idea of using a discount rate of 14% (average risk) to figure out the present value costs of leasing and purchasing even though the assistant treasure suggested a 12% (low risk) discount rate. Agro-Chem, Inc. brought in the company’s CPA to help settle the debate
inventory using the cost method and did not change the method used during the current
You use a perpetual inventory system and value the inventory using FIFO. Prior to making adjusting year-end entries you valued the inventory at the lower-of-cost or-market. Justify why you valued the inventory at lower-of-cost or-market.
330-10-30330-10-30-1 The primary basis of accounting for inventories is cost, which has been defined generally as the price paid or consideration given to acquire an asset. As applied to inventories, cost means in principle the sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location. It is understood to mean acquisition and production cost, and its determination involves many considerations. 330-10-30330-10-30-2 Although principles for the determination of inventory costs may be easily stated, their application, particularly to such inventory items as work in process and finished goods, is difficult because of the variety of considerations in the allocation of costs and charges.
Three points in this section shows that Microsoft employs a conservative policy on inventories. First, inventories are stated at the Lower of cost or market(LCM), which is a conservative accounting policy. This policy is very important for high-technology companies like MS; it 's products ' cost and selling price are declining. Second policy is employed to avoid overstating assets and income. Next, Microsoft regularly review inventories and their estimated utility. Finally, in case the inventory 's utility decreases, the company reduces the inventory to a new cost basis.
A vertical and horizontal analysis of each company's balance sheet and income statement in this particular case will be enlightening. A vertical analysis will for instance shed some light on how revenue is being used. In this case, each component of the companies' financial statements will be converted into a percentage of a key component of either the balance sheet or the income statement. A special common size balance sheet and income statement will be utilized to ease comparison. The
The Company had $1.55 of current assets to repay each $1 in liabilities in 2014, dropping to $0.94 per $1 in 2015 respectively. The decrease in current ratio occurred due to the decrease in current assets and increase in current liabilities from 2014 to 2015. It is important to recognize that in 2015, SCC did not have enough current assets to pay for its current liabilities. The note of financial statements attributed this to the increase in trades payable and accrued expenses from the expansion plan of SCC, leading to
I have taken it upon myself to test two inventory management systems and have found a system that will yield the least cost to Parts Emporium Inc. The two systems I have tested are the Continuous Inventory System and the Periodic Inventory System. Using data that I have gathered from the products DB032 and the EG151, I have compiled calculations and have concluded a continuous inventory system would be best for our corporation. Attached you will find said calculations; I would like to take this moment and present the continuous inventory system and recognize all of the relevant costs. The following is an explanation of each calculation under the continuous inventory system:
Nature of the business: Comptronix’s main product was circuit boards for personal computers and medical devices. This industry is a rapidly changing industry where technologies might become out-of-date rapidly. The nature of this industry is in such a way that could negatively impact the sales of companies with slightly outdated technologies while could considerably increase the sales of companies with slightly more advanced technology. It is therefore evident that an inherent risk factor exists for Comptronix due to their nature of business. Due to fast technology changes in electronics industry there is a high risk of inventory obsolescence and misestimating some accounts. This would also contribute to increase inherent auditing risk.
Balance sheets and income statements are a snapshot of a company’s stability and financial situation. Combined the statements show the income, expenses, and stockholder’s equity in the company. These statements are often analyzed by financial institutions when a company comes to them needing a loan. Stockholders and other investors also look at these statements to make sure their investment will return a profit for them. This paper will look at four different companies and their balance sheets and income statements. The companies are Eastman Chemical Company, Covenant Transportation
Once they have their inventory under control, the purchasing department should complete a very detailed cost analysis to determine the total inventory cost, including all aspects and hidden fees. Once they have the
In Balance Sheet under Non-current Liabilities: Bonds Payable Less: Bond Discount $100,000 ($20,000 - $784)