Accounting Group Project (Group 9)-2

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BMM-8110

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Jan 9, 2024

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GROUP PROJECT (GROUP 9) Maarisha . (110105545) Aizaaz Saeed (110116595) Moses Yusuf (110108921) Okoro Ezinne Diana (110120433) Kamrun Nahar (110094266) Odette School of Business, University of Windsor Master of Management (BSMM8110-1) Dr Santanu Mitra Due Date (02/08/2023)

1. Calculate gross profit margin and net profit margin for 2021 and 2022 and comment on the change in the company’s profitability. Ans. Calculation of Gross Profit Margin and Net Profit Margin The gross profit margin is calculated by dividing gross profit by total revenue. Gross Profit Margin = Gross Profit Total Revenue ×100 Gross Profit Margin for 2021 = 1,954,187 5,562,714 × 100 = 35.13% Gross Profit Margin for 2022 = 2,277,954 6,200,957 × 100 = 36.73% Coca-Cola's gross profit margin grew from 35.13% to 36.73% in 2022. A larger gross profit margin is a sign that the company's main business is bringing in more income, which is good news for the business. On the other hand, net profit margin is calculated by dividing net profit by total revenue. Net Profit Margin = Net Profit Total Revenue × 100 Net Profit Margin for 2021 = 189,580 5,562,714 × 100 = 3.4% Net Profit Margin for 2022 = 430,158 6,200,957 × 100 = 6.9% According to the calculations above, Coca-Cola's net profit margin will be 3.4% in 2021 and 6.9% in 2022. The net profit margin has significantly risen, which shows that the business is making more money as a percentage of sales. The net profit margin has significantly risen, which shows that the business is making more money as a percentage of sales.

2. Locate the note about the company’s marketing program and summarize it. Ans. Coca-Cola uses a wide range of sales and distribution channels as part of its complete marketing strategy. Direct sales to grocery stores, mass merchandisers, club stores, convenience stores, and pharmacies are a few examples. Additionally, they aim for local establishments including eateries, schools, amusement parks, and leisure centres. Vending machines also act as points of sale for goods. Coca-Cola relies on new brand and product releases, packaging improvements, and sales promotions to increase sales in the non-alcoholic beverage sector. Their products are typically sold in recyclable, single-use bottles and cans, with various package designs depending on the market. Coca-Cola makes a substantial investment in advertising across a variety of media platforms, including web, television, and radio, which is a key component of its marketing initiatives. To increase product visibility, local sales promotions are also taken into consideration. For the company, preserving or growing income depends on these marketing and merchandising operations. Coca-Cola emphasises a consistent and well-planned charitable giving programme to support the communities they serve, in addition to their marketing and merchandising initiatives. They gave large sums of money to numerous organisations and donor- advised funds in 2022. Depending on future financial results and commercial considerations, they want to keep making philanthropic donations. 3. Discuss the details about the net income per share (including the calculation part) as discussed by the company in the notes of the financial statements. Ans. The dividends on the Class B Common Stock shares are not required to be subtracted from net income because it is anticipated that all shares of Class B Common Stock have been converted. Therefore, the Common Stock will receive all of the Undistributed Earnings. According to the

sentence before, the basic net income per share and the diluted net income per share for common stock and Class B common stock are the same. 4. What is the company’s accounting policy for goodwill as discussed in the notes to the financial statements? Ans. The Coca-Cola Company assesses the goodwill's recoverability and impairment in line with generally accepted accounting principles (GAAP). During this process, the management team must make decisions and assumptions. The organization computes asset fair values based on these theories and attempts to align them with market expectations. The estimations and presumptions are routinely examined and amended to ensure accuracy and relevance. The Coca-Cola Company has unique goodwill policies in addition to general accounting principles. The corporation accounts for business combinations using the acquisition technique, attributing all goodwill to a specific reporting unit under the Non-alcoholic Beverages segment. The corporation does a goodwill impairment test annually on the first day of the fourth quarter, or more frequently if circumstances point to a likely impairment. If the estimated fair value of the reporting unit is higher than its carrying value, goodwill is not deemed to be damaged. The excess carrying value of goodwill is written off if the carrying amount, which includes it, is greater than the estimated fair value. 5. What are the company’s policies regarding the amortization of intangible assets? Ans. The company follows a policy of amortizing intangible assets on a straight-line basis over their estimated useful lives. The two types of intangible assets mentioned in the disclosure are Distribution Agreements and Customer Lists.

1. Distribution Agreements: The company's distribution agreements are amortized on a straight-line basis, and they have an estimated useful life of 20 to 40 years. The beginning balance of distribution agreements, net, is adjusted for other distribution agreements added during the year and reduced by additional accumulated amortization. The amortization expense for distribution agreements is recorded annually and will continue in future years based on the recorded amounts as of December 31, 2022. Assuming no impairment, the annual amortization expense for distribution agreements will be approximately $25 million for each fiscal year from 2023 through 2027. 2. Customer Lists: The company ’ s customer lists are also amortized on a straight-line basis, and they have an estimated useful life of five to 12 years. The beginning balance of customer lists, net, is adjusted for any additional customer lists added during the year and reduced by additional accumulated amortization. The amortization expense for customer lists is recorded annually and will continue in future years based on the recorded amounts as of December 31, 2022. Assuming no impairment, the annual amortization expense for customer lists will be approximately $2 million for each fiscal year from 2023 through 2027. 6. Describe the company’s policy on depreciation of property plant and equipment. Ans. The company's property, plant, and equipment policy The business employs the straight-line depreciation method to determine how much property, plant, and equipment have depreciated. The asset's cost is distributed evenly across its useful life when using the straight-line depreciation technique. Coca-Cola has established a few additional conditions for the depreciation of property, plant, and equipment in addition to the straight-line policy. Depreciation is calculated based on the projected

useful life or the lease period, for example, in the case of leasehold improvements under operating leases. What matters is which phrase is shorter. Routine maintenance, minor replacements, and repair costs, on the other hand, are regarded expenses and are subtracted when they arise. These costs are added to the asset's original value whenever a new addition or replacement of any type is made to the asset. Finally, the cost and accrued depreciation are often deleted from the records when assets are replaced or disposed of. The consolidated statements of operations include any profits or losses attributable to the disposal. Straight-line depreciation is the method Coca-Cola has adopted since it is simple and broadly accepted by accounting standards like GAAP and IFRS. 7. Describe the company’s policy about the allowance for doubtful accounts. Comment on the change in the allowance for doubtful account balance from 2021 to 2022 vis- à -vis the change in the balance of gross receivables. You may calculate the percentage of allowance to the gross receivables and look for a change of such percentage over the year 2022 and evaluate. Ans. (16,119) for 2022, (17,336) for 2021 Allowance for doubtful account 35,786 for 2022 57,737 for 2021 Account receivables Calculate change in ADA 16,119 - 17,336= -1,217 Cal change in Account Receivables 35,789 – 57,737 = -21,948 Cal change in ADA to Gross Receivables = -1,217/-21,948 *100 = 0.05544

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