Dow Chemical recorded pretax restructuring charges of $689 million in 2009. The charges consisted of asset write-downs of $454 million, costs associated with exit or disposal activities of $66 million, and employee severance costs of $169 million. The company paid $72 million cash to settle these restructuring charges during the year (2009). At year end, the restructuring accrual associated with these charges was: A) $689 million B) $617 million C) $163 million D) $ 97 million E) There is not enough information to determine the amount
Dow Chemical recorded pretax restructuring charges of $689 million in 2009. The charges consisted of asset write-downs of $454 million, costs associated with exit or disposal activities of $66 million, and employee severance costs of $169 million. The company paid $72 million cash to settle these restructuring charges during the year (2009). At year end, the restructuring accrual associated with these charges was: A) $689 million B) $617 million C) $163 million D) $ 97 million E) There is not enough information to determine the amount
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter6: Accounting Quality
Section: Chapter Questions
Problem 21PC
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Dow Chemical recorded pretax restructuring charges of $689 million in 2009. The charges consisted of asset write-downs of $454 million, costs associated with exit or disposal activities of $66 million, and employee severance costs of $169 million. The company paid $72 million cash to settle these restructuring charges during the year (2009). At year end, the restructuring accrual associated with these charges was:
A) $689 million
B) $617 million
C) $163 million
D) $ 97 million
E) There is not enough information to determine the amount
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Rationale: Of the $689 million total restructuring charge, only the exit costs and severance costs must eventually be settled in cash. The asset write downs are not accrued – they reduce the assets on the balance sheet. The company accrued $66 million + $169 million = $235 million as a liability. Thus, if the company paid $72 million cash, the remaining accrual is $163 million at year end.
correct answer is C. this was a bit difficult
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