Appendix B of this book contains a copy of the 2002 annual report of General Mills, Inc.

Required Review the annual report and answer each of the following questions.

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A. What was the primary inventory estimation method used by General Mills? What is the effect on the company’s cost of goods sold and operating income of using this primary method as compared to other methods? (Hint: Look at Notes 1c and 6. The “Reserve for LIFO” is an estimate of the difference between FIFO and LIFO values.)

B. What was the amount of General Mills’ allowance for doubtful accounts for 2002? Did the relationship between estimated doubtful accounts and net sales change from 2000 to 2002?

C. How much income tax expense did General Mills recognize as expense for 2002? How much income tax did the company owe for 2002? What were the primary causes of the difference between income tax expense and income tax payable? How much income tax did General Mills pay in 2002? (Hint: See Note 16 as well as the statement of earnings. The total to be paid for 2002 is “Total Current.”)

D. How much did General Mills report for depreciation and amortization and for interest expense in 2002? How much cash did General Mills pay for depreciation, amortization, and interest in 2002? (Hint: See the income statement and Note 13.)


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