Question

E9-36. Analyzing and Interpreting Disclosures on Equity Method Investments Cummins Inc. reports investments in affiliated companies, consisting mainly of investments in nine manufacturing joint ventures. Cummins reports those investments on its balance sheet at $958 million and provides the following financial information on its investee companies in a footnote to its 10-K report. As of and for the years ended December 31 Equity Investee Financial Summary $ millions 2015 2014 2013 ... $5,946 1,265 521 273 42 $ 315 $7,426 1,539 630 $ 330 Net sales................... Gross margin .... Net income...................... Cummins' share of net income ... Royalty and interest income. Total equity, royalty and interest from Current assets ........ Noncurrent assets ..................... Current liabilities. ...... Noncurrent liabilities. Net assets........ $7,799 1,719 690 $ 325 36 $361 _40 $ 370 .. .. .. .. .. $2,458 1,539 (1,796) (284) $1,917 $ 958 $2,476 1,667 (1,875) (420) $1,848 Cummins' share of net assets $ 956 a. What assets and liabilities of unconsolidated affiliates are omitted from Cummins' balance sheet as a result of the equity method of accounting for those investments? b. Do the liabilities of the unconsolidated affiliates affect Cummins directly? Explain.

Note: I have got different answers for this so I am very confused. Request you to kindly let me know what is correct and please provide an explanation for part (a)

Answer 1

Solutions (@). Given that Equity Investee Financial Summary $ millions Net Sales Gross margin Net income Cummins' Shore of net income Royalty and interest income Total equity, royality & interest from investees. As of Efor the years ended Dec}} 2015 2014 2013. 5,946 7426 7,799. 1,265 1,539 1,719 521 630 690 273 330 325 42 40 315 370 361 Current assets Noncurrent assets current liabilities Non Current liabilities Net assets. 2,458 1539 1796 (284) 2,476 1667 1875 (420 1917 1,848 Cummins' share of net assets 958 956. consider In the above Assets = information to be $958 millions i Riabilites $284 millions The liabities are un consolidated affiliated are Omitted from Cummins balance sheet as for the result of the equity method of accounting loves tient.
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b). - The liabilities of not liabilities the for company the investments are investor. The creditor of the investement company to be invested that have resource to the assets of the investor in the event of defaults. company are :: The liability of the investor liabilities of the investee. The liability of the invertee company One Cablu tied for investor.