Please review the attached questions and 10k. I need simple, two line explanations for each.
1. HP provides disclosures related to its pension plans in Note 15 (pp. 129-135). Please answer the following questions based on your reading of this footnote. With respect to only the US Defined Benefit plans and only in 2004, please answer the following questions:
a. By what dollar amount did these plans affect profit?
b. Briefly explain how a company can report net pension income (vs. pension expense) at the same time it is realizing a negative return on pension investments.
c. Provide computations to yield (approximately) the $266 million in interest cost that HP reports as a component of pension expense for its US Defined Benefit plans in 2004.
d. HP has reduced its discount rate in each of the past 2 years. Briefly explain the general effect (no dollar amounts) that this rate reduction has on its balance sheet and income statement:
1. balance sheet
2. income statement
e. What amount of cash benefits did HP pay to its retirees for its US Defined Benefit plans in 2004?
f. What amount of cash contribution did HP make to its US Defined Benefit plans in 2004?
g. Is the HP US Defined Benefit plan over-funded or under-funded and by what amount?
The solution responds to each question as requested and also includes a link to a site for better understanding about the concepts.
NOPAT / Operating expense / NI and Cash Flow
Attached are 6 questions that I am struggling to answer. I am looking for quick bullet point answers and explanations on NOPAT / Operating Expense / Cash Flows and analyst issues.
Please use the HP 10k for data.
1. Using the HP income statement on P85,
a. Compute NOPAT for 2004.
b. How would you justify treating acquisition-related charges as an operating expense?
2. During September, each of the following events occurred at Bob's Packaging Company. For each event, identify the effect it had on net income and on cash flow.
Event Effect on September's Net Income Effect on September's Cash Flow
Purchased $20,000 of merchandise inventory. Payment will be made on October 1.
Sold $12,000 of merchandise that cost $7,000, 25% for cash and the balance on account.
Collected $5,000 of the amount owed to the company from the sale
Received advance payment of $2,400 for work which will be started in October.
Dividends of $9,000 were paid.
3. HP reports restructuring charges in a separate line in its income statement.
a. What is the accounting reason for including this as a separate line item rather than commingling it with another general account, such as G&A expense?
b. Briefly, identify two primary issues relating to the treatment of restructuring charges from an analysis standpoint?
4. HP reports an account titled "accrued restructuring" in its balance sheet.
a. Briefly discuss the effects on the reported profit when this account increases and decreases.
b. Briefly discuss how an account such as this can be used to shift profit from one period to another.
5. HP reports includes a line in its balance sheet titled, "commitments and contingencies" with no dollar amount. What is the accounting reason why no dollar amount is reported for this line item?
6. Referring to HP's balance sheet (p 86),
a. Compute HP's net operating assets (NOA) and net financial obligations (NFO) for 2004. (Hint: the computation is simpler if you utilize NOA = NFO + SE ).
b. Using your answer to part 6a, together with your answer to problem 1a, perform a level 1 disaggregation of return on equity (ROE) for 2004 into its operating and nonoperating components using year-end balances rather than averages. (Hint: the computation is simpler if you utilize NFE = NOPAT - net income).