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    Tootsie Roll Industries

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    FINANCIAL REPORTING PROBLEM: Tootsie Roll Industries

    Refer to the financial statements of Tootsie Roll Industries and the Notes to Consolidated Financial Statements in Appendix A.


    Answer the following questions.

    (a) What were Tootsie Roll's total current liabilities at December 31, 2004? What was the
    increase/decrease in Tootsie Roll's total current liabilities from the prior year?

    (b) How much were the accounts payable at December 31, 2004?

    (c) What were the components of total current liabilities on December 31, 2004 (other than accounts payable already discussed above)?

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    Financial Statements and Accompanying Notes

    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 for Tootsie Roll Industries follow.

    Financial Position
    in thousands
    Assets December 31,
    2004 2003
    Cash and cash equivalents $56,989 $84,084
    Investments 32,369 86,961
    Accounts receivable trade, less allowances of 28,456 18,131
    Other receivables 9,001 3,076
    Finished goods and work-in-process 37,384 28,969
    Raw materials and supplies 21,393 17,117
    Prepaid expenses 5,719 4,416
    Deferred income taxes 1,382 951
    Total current assets 192,693 243,705
    Land 14,973 8,265
    Buildings 61,714 44,960
    Machinery and equipment 244,367 206,697
    321,054 259,922
    Less?Accumulated depreciation 142,304 130,759
    178,750 129,163
    Goodwill 74,002 38,151
    Trademarks 193,342 79,348
    Investments 96,640 112,431
    Split dollar officer life insurance 66,094 62,499
    Investement in joint venture 10,232 ?
    440,310 292,429
    $811,753 $665,297

    Notes to Consolidated Financial Statements

    Basis of consolidation

    The consolidated financial statements include the accounts of Tootsie Roll Industries, Inc. and its wholly-owned subsidiaries (the company), which are primarily engaged in the manufacture and sale of candy products. All significant intercompany transactions have been eliminated.

    The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

    Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.
    Revenue recognition and other accounting pronouncements: Products are sold to customers based on accepted purchase orders which include quantity, sales price and other relevant terms of sale. Revenues are recognized when products
    are delivered to customers and collectibility is reasonably assured. Shipping and handling costs of $31,795, $28,217 and $28,579 in 2004, 2003 and 2002, respectively, are included in selling, marketing and administrative expenses. Accounts receivable are unsecured. Revenues from a major customer aggregated approximately 20.8%, 20.6% and 19.6% of total net sales during the years ended December 31, 2004, 2003 and 2002, respectively. In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 151, "Inventory Costs?an amendment to ARB No. 43, Chapter 4," which amends guidance in accounting for abnormal amounts of idle facility expense.

    The company believes that the pronouncement is generally not applicable to the company's operations and to the extent it may be applicable it is not expected to have a significant impact on the company's consolidated financial statements.
    Cash and cash equivalents: The company considers ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what were Tootsie Roll's total current liabilities at December 31, 2004, what was the increase/decrease in Tootsie Roll's total current liabilities from the prior year, how much were the accounts payable at December 31, 2004, and what were the components of total current liabilities on December 31, 2004.