3. Using information in Note 8, compare the amount recorded for Wendy’s investment in TimWen at December 30, 2012 with Wendy’s 50% share of TimeWen’s equity at December 30, 2012. What accounts for the difference between these two amounts? Show calculations to reconcile the two figures.
4. Consider the information disclosed in Note 8 regarding Wendy’s investment in the TimWen Joint Venture.
a. How did Wendy’s equity method investment in TimWen affect their earnings before taxes in 2012 and 2011? Where does this appear in Wendy’s consolidated statements of operations?
b. Prepare the journal entry to record Wendy’s share of TimWen’s 2012 earnings.
c. What is the amount of amortization of the purchase price adjustments in 2012? Prepare the journal entry to record the amortization for the purchase price adjustments for 2012.
d. What amount of dividends did Wendy's receive from the TimWen joint venture in 2012 and 2011? Prepare the journal entry to record the receipt of dividends from TimWen for 2012.
5. Consider the information in the statement of cash flows.
a. The operating activities section of the statement of cash flows reports a negative adjustment for “Equity in earnings in joint ventures, net” of $8,724 in 2012. Reconcile this amount to the information disclosed in Note 8. Explain why a negative adjustment is made to arrive at net cash from operating activities.
b. The operating section also reports a positive adjustment for “Distributions received from joint venture” of $15,274 in 2012. Reconcile this amount to the information disclosed in Note 8. Explain why a positive adjustment is made to arrive at net cash from operating activities.
THE WENDY'S COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands) December 30, 2012 January 1 2012 ASSETS Current assets Cash and cash equivalents . . . . . . . . . . . . . … Accounts and notes receivable . . . . .. . . . . . . . .. . . . . . . Inventories . Prepaid expenses and other current assets .. . . . . . . . .. Deferred income tax benefit . _ . _ . . . . . . . . . . . . . . . .. . . .. - 13.805 24,231 91、489 65,777 68,349 12,903 27,397 80,970 70,547 709,827 735,397 876,201 870,431 Investments 113,283 119,271 . . 52,013 67,542 Deferred costs and other assets Total assets .. LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 12,9116,597 70,826 Accounts payable .. Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . .. . . .. Advertising funds restricted liabilities . . . . .. . .. .. . . . .. . . .. . 81,301 178,298 70,547 . . . 137,348 65,777 286,862 336,743 Long-term debt Deferred income taxes . 438,217458,1017 147,614 . . . 147,808 Commitments and contingencies Stockholders' equity: Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares 47,042 47,042 issued Additional paid-in capital Common stock held in treasury, at cost Accumulated other comprehensive income .. . . 2.361 .. . . . . . . . . . . . . . . . . . . . . . . . . . .. $4,303,199 $4,289,129 Total liabilities and stockholders' equity
THE WENDY'S COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATION:S (In Thousands Except Per Share Amounts) Year Ended January 1,January2, December 30, 2012 2011 Revenues: es 2,505,242 2,431,358 2,375,439 Costs and expenses Cost of sales 287,808 292,390 311,511 146,976 22,992 126,846 12,883 45,711 4,152 reciation and amortization . 21,097 41,031 4,335 Facilities relocation costs and other transactions .. .. . . . . . .. . . . . . . 26,326 3,357 2,382,495 2,294,2372,224994 122,747137,121150,445 (98,604) (114,110) (118,385) perating profit . . Interest expense Loss on early extinguishment of debt Investment income, net . . . . . . . .. . . . .. . . . . . . . .. .. (75,076) 36,243 1,565 484 945 (26,197) 5,259 2,434 (Loss) income from continuing operations before income taxes and noncontrolling interests . . Benefit from (provision for) income taxes . . . . . . . . . . . . . . . . . .. . . . .. .. (13,125) 24,440 13,556 (6,528) 17,912 21,083 Income from continuing operations . . . . . . . . . . . . . . . . . 7,958 Discontinued operations: . Income (loss) from discontinued operations, net of income taxes 1,951 Loss on disposal of discontinued operations, net of income taxes .. Net income (loss) from discontinued operations .. .. . . . . .. . .. 762 (22,436) (8,037) (22,436) (4,325) (442)(8,799) 1,509 9,467 9,875 Net income attributable to noncontrolling interests Net income (loss) attributable to The Wendy's .. . Company... 7.083 875(4325) Basic and diluted income (loss) per share attributable to The Wendy's Compan 04 01 07 Dividends per share
THE WENDY'S COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands) Year Ended December 30, January 1, January 2, $ 9,467 $9,875 (4,325) 6,096 (6,869) 12,666 95 (59) 5.879(6,915) 12,702 15,3462,960 8,377 2012 2012 2011 Other comprehensive income (loss), net: Foreign currency translation adjustment . . . . . . . . . . . . . . . . . .. . hange in unrecognized pension loss, net of income tax benefit (provision) of $127, $(21), and $(54), respectively .. (217) (46) Change in unrealized gain on available-for-sale securities, net of income tax Other comprehensive income (loss), net . . . . . .. . . . . . . . .. . .. . . Comprehensive income . Comprehensive income attributable to noncontrolling interests . . . (2,384) Comprehensive income attributable to The Wendy's $12,962 2,960 8,377
THE WENDY'S COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In Thousands) Accumulated Other Comprehensive Income (Loss) Foreign CommonCurrengy Additional Tot Common Paid-In Accumulated Held in Translation reasury Adjustment Oher Stock apital ...547.042 $2,761,433 $(380.480) $ (85.971) $ (4.696) $ (989) $2,336,339 12,702 (27,621) Balance at January 3, 2010 (4.325) (4,325) et Changcs in accunulated other 12 36 (27.621) Accrued dividends on non-vested Repurchases of common stock Share-based compensation expense -(167.743) -(167.743) .. .. 13,704 Common stock issued upon exercises of Common stock issued upon vesting of Tax charge from share-based 1,278 562) (2,765) (664) . . ..47.042 2771.126 (412,464 (240547)7 Ins (664) rest shares . 2,101 (664) compensation . Other Balance at January 2, 2011 7.970 953) 2,163,174 9,875 9,875 Changes in accumulated other - (6.869) (46) (6,915) (32,366) Cash dividends Accrued dividends on non-vested (32,366) restricted stock Repurchases of common stock Share-based compensation expense Common stock issued upon exercises of (157,556) (157,556) ー 17,688 6,193 (2,265) 17,688 St ions . Common stock issued upon vesting 3,871 Tax charge from share-based (1,923) compensation .. Other... . 208 Balance at January 1, 2012 . . . 47,042 2,779,87 (434.999) (395,947) ,101 (999) 1,996,069 Net income attributable to The Wendy's 7,083 7,083 Company .. Net income attributable to Distribution to noncontrolling (2,384) (2,384) interests Changes in accumulated other 5,879 (39,043) -6,096 (217) comprehensive income (loss) .. .. Cash d Accrued dividends on non-vested restricted stock Share-based compensation expense. Common stock issued upon exercises of 7,576 Common stock issued upon vesting of (3,021) restricted shares Tax charge from share-based (2,906) 220 compensation .. . -
THE WENDY's COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED (In Thousands Except Per Share Amounts) The following is an analysis of the allowance for doubtful accounts: Year End 2011 2010 Balance at beginning of year: Current ...- Provision for doubtful accounts Franchisees and other DFR Notes (see Note 4) ....670 264 9,694 (21,227) (5,504) Uncollectible accounts written off, net of recoveries . . . . . . . . .. . . . . . . . Breakfast notes receivables fully reserved (see Note 17)···… . . . . . . . . . . . Balance at end of year: (28) (843) (6,474) 3544 Current Non-current 6,321 4,053 7,321 2,881 963 3,778 $9,202 $5.016 11,099 . 2 otal . . . . (7) Pledged Assets The following is a summary of the Company's assets pledged as collateral for certain debr Year End 2012 Cash and cash equivalents Accounts and notes receivable (including long-term) .. .. 121,360 . .. . 65,109 . . . . .. .. .. . . . . . .. 12,473 roperties Other assets -.. 19,760 $2,451,499 (8) Investments The following is a summary of the carrying value of our investments: Year End 2012 2011 Equity investments: . $ 89,370 $ 91,742 Joint venture in Japan (a) Cost investments: Arby's Jurlique Other cost investments 325 4,913 8,127 $111,533$119,271 (a) In 2012, our equity investmenc in the Japan JV was included in "Other lia bilities," Wendy's has provided certain guarantees and the partners have agreed on a plan to finance anticipated future cash rcquirements of the Japan JV as further described below
HE WENDY'S NOTES TO y's COMPANY AND SUBSIDIARIES ONSOLIDATED FINANCIAL STATEMENTS-CONTINUED Thousands Except Per Share Amounts) (In t in Joint Venture with Tim Hortons Inc Wendy's is a partner in TimWen and our 50% share of the joint venture is accounted for using the equity method of accounting. Our equity in earnings from Tim Wen s included in "Other operating expense, net." The carrying value of our in $54,088 and $55,805 as of December 30, 2012 and January 1, 2012, respectively, primarily due to purchase price adjustments from the Wendy's merger vestment in TimWen exceeded our intercst in the underlying equity of the joint venture by Presented below is activity related to our portion of Tim Wen ed our consolidated balance s consolidated statements of operations as of and for the years ended December 30, 2012. January 1, 2012 an January 2, 2011 Year Ended 2012 2011 2010 Balance at beginning of period Equity in earnings for the period.. . Amortization of purchase price adjustments (a) . .. . . . . . .. . . . ...0122 13,680 13,505 12,3106 (3,129 2.934) (2,857) 10,55110,571 (15,274) (14,942) (13,980) 9.459 Distributions received Foreign currency translation adjustment included in "Other comprehensive income (loss), ner ...2,351(2,518) 5.676 (a) Based upon an average original aggregate life of 21 years. (b) Included in "Investments. Presented below is a summary of the financial information of Tim Wen, including the balance sheets as of December 30, 2012 and January 1, 2012 and certain income statement information for the years ended December 30, 2012, January I, 2012 and January 2, 2011. The summary balance sheet financial information doe not distinguish between current and long-term assets and liabilities. 2012 2011 Balance sheet information: ....$73,013 $73.394 ro Ics - 3,274 4.231 2,516 2,565 $82,341 $82,811 Other Accounts payable and accrued liabilities 8,5618,655 Partners equity .. $82.341 $82,811 Year Ended 2010 Income statement information:
E WENDY'S COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Cash flows from operating activities: December 30, January 1, January 2, Adjustments to reconcile net income (loss) to net cash provided by .. . $ 9,467 9,875 S (4,325) operating actvities 154,174 45302 182,172 Distributions received rom Tim Wen joint venturc .. . 75,076 15,27414,942 13,980 11,473 7,688 13,704 21,097 14,44 69,477 7,070 Net (recognition) receipt of deferred vendor incentives...... 8.120 7,973 4,241 6,216 11,779 9,334 isposal of A 442 (8,724) (9,465) 9,459) (31,598) 624 (29,779) (145)(5,201) 8,264 Equity in earnings in joint ventures, net (27,769) 3,093 Orher hanges in operating assets and liabilities: 3,999 (2,690) (4,730) 394 (1,360) (7,580) 1,514 (9,266 11,364 (15,795) (42,906)120 29,508) 190,415 246.717 226,250 Inventories . . 'repaid cxpenses and other current assets unts payable . rued expenses and other current liabilities Net cash provided by operating activities .. . . Cash flows from investing activitics: tal expenditures . uisitions . ..(197,590) (146,763) (147.969) (40,608) (11,210) (3,123) Franchise loans, net -97.925 Sale of Arby's, ner . . . . 5,660 Dispositions . . (841)32,158 ...(189,385) (58,197) (112,922) - 497,661 (57) (16,353) (157,556) (173,537) 27,949 (3,251)(265) Investment activities, net (see below) Net cash used in investing activities .. . . . . Cash flows from finan activities: Procceds Repayments of long-term d Deferred financing costs Premium payments on redemption/purchase of notes from long-term debt 68 ases of common st (39,043) (32,366 (27,621) 6,359 52(2.262) Net cash used in financing activities . .. .. . . .. ....(24,129) (224,584) 7,806 Proceeds from stock option exercises Other, net . . . . . . . . .. . . . . . . . .. .. (953) (194,150) Net cash used in operations before effect of exchange rate changes on Effect of exchange rate changes on Net decrease in cash and cash equivalents .. .. . .. .. . . .. . . . Cash and cash equivalents at beginning of period . .. . .. . . . . Cash and cash equivalents at end of period 1,229 (21,870) (37,277 (79,211) 475,231512,508 591,719 . . . . . . . . .. . . .