Financial Accounting: An Integrated Statements Approach, 2nd Edition

The notes to the financial statements for Maytag Corporationprovided the following table of

special charges.

Maytag Corporation

Schedule of Special Charges (annotated)

For the Year Ended January 1, 2005

(in thousands)

Balance, Charged to

Description of Jan. 3, Earnings Cash Noncash Balance,

Special Charge 2004 2004 Utilization Utilization Jan. 1, 2005

Severance and related

expense $15,326 $37,999 $(30,822) $22,503

Moving of equipment 981 (981)

Asset write-downs 30,174 $(30,174)

Excess inventory 1,453 (1,453)

Purchase commitment 1,610 1,610

Other 1,096 (1,096)

Total $15,326 $73,313 $(32,899) $(31,627) $24,113

The special charges include both severance-related and asset impairments. The columns of the

table indicate the balances and change in balances of the balance sheet accounts affected by the

restructuring events.

a. Journalize the entry for special charges for 2004.

b. What is meant by “noncash utilization”?

c. Provide the balance sheet disclosure for the restructuring obligation on January 1, 2005.

Citigroup, Inc., one of the largest financial services firms in the world, disclosed the following

retained earnings information in its statement of stockholders’ equity:

2004 2003 2002

Retained earnings balance, beginning of year $ 93,483 $81,403 $69,803

Net income 17,046 17,853 15,276

Common dividends (8,307) (5,702) (3,593)

Preferred dividends (68) (71) (83)

Balance, end of year $102,154 $93,483 $81,403

The average common shares for determining basic earnings per share for the three most recent

years were as follows:

2004: 5,107.2

2003: 5,093.3

2002: 5,078.0

Total common stockholders’ equity and the stock price at year-end were as follows:

Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2002

Common stockholders’ equity $108,166 $96,889 $85,318

Common stock price 48.18 48.54 32.83

a. Determine the earnings per common share for all three years. Round to two decimal places.

b. Determine the book value per common share for all three years. Round to two decimal

places.

c. Determine the price-earnings ratio for all three years. Round to two decimal places.

d. Determine the price-book ratio for all three years. Round to two decimal places.

e. Interpret the trend in price-earnings and price-book ratios for the three years.

574 Chapter 12 Special Income and Investment Reporting Issues

Case 12-4

Market-based financial

measures

Case 12-3

Restructuring charges and

fixed asset impairment

disclosure