Refine Assumptions for Dividend and Retained Earnings Forecast Provided below is FY2016 information for Medtronic PLC. Medtronic plc Consolidated Statement of Income ($ millions) Apr. 29, 2016 Net sales $29,277 Costs and expenses Cost of products sold 9,142 Research and development expenses 2,224 Selling, general, and administrative expense 9,469 Special charges (gains), net 70 Restructuring charge, net 290 Certain litigation charges, net 26 Acquisition-related items 283 Amortization of intangiable assets 1,931 Other expense, net 107 Operating profit 5,735 Interest expense, net 955 Income from operations before income taxes 4,780 Provision for income taxes 908 Net income $3,872 Medtronic plc Consolidated Balance Sheet ($ millions) Apr. 29, 2016 Apr. 24, 2015 Current assets Cash and cash equivalents $2,975 $4,942 Investments 9,758 14,637 Accounts receivable 5,562 5,112 Inventories 3,473 3,463 Tax assets 697 1,335 Prepaid expenses and other current assets 1,234 1,454 Total current assets 23,699 30,943 Property, plant, and equipment, net 4,940 4,798 Goodwill 41,500 40,530 Other intangiable assets, net 26,899 28,101 Long-term tax assets 1,383 774 Other assets 1,559 1,737 Total assets $99,980 $106,883 Current liabilities Short-term borrowing $1,092 $2,533 Accounts payable 1,709 1,610 Accrued compensation 1,712 1,611 Accrued income taxes 566 935 Deferred tax liabilities - 119 Other accrued expenses 2,185 2,464 Total current liabilities 7,264 9,272 Long-term debt 30,247 33,752 Long-term accrued compensation 1,759 1,535 Long-term accrued income taxes 2,903 2,476 Long-term deferred tax liabilities 3,729 4,700 Other long-term liabilities 1,916 1,819 Total liabilities 47,818 53,554 Shareholders' equity Ordinary shares - - Retained earnings 54,030 54,513 Accumulated other comprehensive (loss)/income (1,868) (1,184) Total shareholders' equity 52,162 53,329 Total liabilities and shareholders' equity $99,980 $106,883 a. Use the financial statements along with the additional information below to forecast retained earnings for FY2017. Forecasted net income $4,987 million Dividends to shareholders' in FY2016 2,172 million Forecasted retained earnings $Answer 0 million b. Suppose the MD&A section of the Form 10-K and additional guidance from the company reveals the following additional information. 2017 Est. 2016 Actual 2015 Actual Dividends per share $1.73 $1.52 $1.22 At FY2016 year-end (April 29, 2016), the company had approximately 1,400 million shares issued and outstanding. Use this information to refine your forecast of retained earnings for FY2017. Forecasted retained earnings $Answer 0 million

Refine Assumptions for Dividend and Retained Earnings Forecast Provided below is FY2016 information for Medtronic PLC. Medtronic plc Consolidated Statement of Income ($ millions) Apr. 29, 2016 Net sales $29,277 Costs and expenses Cost of products sold 9,142 Research and development expenses 2,224 Selling, general, and administrative expense 9,469 Special charges (gains), net 70 Restructuring charge, net 290 Certain litigation charges, net 26 Acquisition-related items 283 Amortization of intangiable assets 1,931 Other expense, net 107 Operating profit 5,735 Interest expense, net 955 Income from operations before income taxes 4,780 Provision for income taxes 908 Net income $3,872 Medtronic plc Consolidated Balance Sheet ($ millions) Apr. 29, 2016 Apr. 24, 2015 Current assets Cash and cash equivalents $2,975 $4,942 Investments 9,758 14,637 Accounts receivable 5,562 5,112 Inventories 3,473 3,463 Tax assets 697 1,335 Prepaid expenses and other current assets 1,234 1,454 Total current assets 23,699 30,943 Property, plant, and equipment, net 4,940 4,798 Goodwill 41,500 40,530 Other intangiable assets, net 26,899 28,101 Long-term tax assets 1,383 774 Other assets 1,559 1,737 Total assets $99,980 $106,883 Current liabilities Short-term borrowing $1,092 $2,533 Accounts payable 1,709 1,610 Accrued compensation 1,712 1,611 Accrued income taxes 566 935 Deferred tax liabilities - 119 Other accrued expenses 2,185 2,464 Total current liabilities 7,264 9,272 Long-term debt 30,247 33,752 Long-term accrued compensation 1,759 1,535 Long-term accrued income taxes 2,903 2,476 Long-term deferred tax liabilities 3,729 4,700 Other long-term liabilities 1,916 1,819 Total liabilities 47,818 53,554 Shareholders' equity Ordinary shares - - Retained earnings 54,030 54,513 Accumulated other comprehensive (loss)/income (1,868) (1,184) Total shareholders' equity 52,162 53,329 Total liabilities and shareholders' equity $99,980 $106,883 a. Use the financial statements along with the additional information below to forecast retained earnings for FY2017. Forecasted net income $4,987 million Dividends to shareholders' in FY2016 2,172 million Forecasted retained earnings $Answer 0 million b. Suppose the MD&A section of the Form 10-K and additional guidance from the company reveals the following additional information. 2017 Est. 2016 Actual 2015 Actual Dividends per share $1.73 $1.52 $1.22 At FY2016 year-end (April 29, 2016), the company had approximately 1,400 million shares issued and outstanding. Use this information to refine your forecast of retained earnings for FY2017. Forecasted retained earnings $Answer 0 million

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 54CE

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