Assignmen1ACCTWEEK5.docx

Johnson and Johnson Incorporation

Name: Seun Ubani Brady

Instructor: Carla Kroeze

Course: Principles of accounting ACCT 220

Date: 03/20/2022

Johnson and Johnson Incorporation

Introduction

Johnson and Johnson company is a global leader company in healthcare field. The company is involved in the carrying out research, manufacturing and selling of healthcare products. Johnson and Johnson company was formed in 1887 in the current state of New Jersey where it still has its current headquarters. Since its formation in 1887, Johnson and Johnson company has expanded and currently carries out its business in almost all countries across the globe. Johnson and Johnson company has three business segments which includes pharmaceutical, consumer health and medical devices. Consumer health business segment of Johnson and Johnson company is focused mainly personal healthcare products. The company business segment produces products which enhances personal skin health and beauty. Pharmaceutical business segment of Johnson and Johnson company has immunology, infectious disease, neuroscience, Oncology, cardiovascular and Metabolism and pulmonary hypertension as the main therapeutic areas which the company focuses. Johnson and Johnson company is also involved in the manufacture of medical devices which provides interventional solutions to patients.

Despite Johnson and Johnson company being present in all countries across the world, the company has only physical office in the United States. It operates in other countries virtually in all company’s segments to avoid the negative impact of different political system. The company mainly carries its business with healthcare professionals, hospitals, wholesalers, medical distributors and medical retail shops. Jonson and Johnson company is very competitive in all its business segment both locally in the United States and at global level. Some of the key competitors of Johnson and Johnson company includes the Pfizer, Unilever, Procter and Gamble, Merck among many other companies with produces similar products as those of Johnson and Johnson company. Johnson and Johnson company ensures that company remains competitive through investing much in research and development. Through research and development, Johnson and Johnson company has been able to improve its products to ensure they remain highly demanded in the market. Joaquin Duato is the current chief executive officer of Johnson and Johnson company and has been serving in the position since his appointment in January 2022. Johnson and Johnson company has market capitalization of $464.85 billion which makes the company one of the most valuable companies in terms of market capitalization.

Account Receivable

According to the consolidated balance sheet statement of Johnson and Johnson company, Account receivable of the company was valued at $15.283 billion. This was an improvement from company’s account receivable of $13.576 billion in 2020. This value of account receivable represents the net amount which the company expects to receive from customers. Johnson and Johnson company deals with customers across the world including retailers, hospitals, wholesale, and medical distributors across t the world. Since customers are from different locations, Johnson and Johnson company is exposed to credit risks. Some of the customers that Johnson and Johnson Company deals with are likely to default paying for inventory supplied to them by Johnson and Johnson company on credit.

Allowance for doubtful accounts is important for Johnson and Johnson company to ensure that customer defaulting in making payment for the inventory supplied to them is accounted for. Failure by Customer to make payment for supplied inventory is a loss to Johnson and Johnson company. According Johnson and Johnson company allowance for doubtful debt has decreased to $230 million in 2021 from $293 million which was recorded in 2020.

Inventories

Johnson and Johnson company inventories value is stated at the lower of cost or net realizable value. First in first out inventory valuation method is the method which is used by Johnson and Johnson company. Johnson and Johnson company value of inventory increased from $9.132 billion in 2020 to $10.387 billion in 2021 which represents an increase by $1.248 billion.

Johnson and Johnson company inventory comprises of raw materials and supplies, goods in process and finished goods. At the end of fiscal year 2021, Johnson and Johnson company inventory comprised of mainly finished goods which was valued at $6.508 billion. Goods in process was valued at $2.287 billion while raw materials and supplies of the company was valued at $1.592 billion

Property plant and Equipment

Property, Plant and Equipment is one of the key assets which is owned by Johnson and Johnson company. According to the balance sheet, net book value of Property, Plant and Equipment was valued at $18.692 billion which was an improvement from 2020 value of $18.766 billion. The value of the PPE is stated at cost in balance sheet and it is usually depreciated using the straight-line method. Some of the key PPE which are owned by Johnson and Johnson company includes building and equipment with an estimated useful life of between 20 and 30 years, land and leasehold improvement which is estimated to have life of between 10 and 20 years and machinery and equipment which is estimated to have life of between 2 and 13 years. The accumulated depreciation on property, plant and equipment owned by Johnson and Johnson company is estimated to be $28.717 billion.

Auditor’s Report

Johnson and Johnson company is audited by PricewaterhouseCooper LLP. According to the Auditor, Johnson and Johnson company financial statement represents the true and fair value of the company. PWC company provided a qualified opinion on financial performance of the company. Some of the critical audit matter Affecting Johnson and Johnson company includes U.S pharmaceutical Rebate Reserves, litigation contingencies-Talc and litigation -opioids.

Johnson and Johnson company financial statement

The financial statement of the Johnson and Johnson company includes Balance sheet, statement of earnings, statement of cash flows and Statement of changes in Equity. The financial statements are prepared to represent the fair value of both assets and liabilities of the company. Financial statement of Johnson and Johnson company have been attached below.

Conclusion

According to Sec 10K report, Johnson and Johnson company is a profitable company. The company generates major income from the sales to customers. Net earning of Johnson and Johnson company in 2021 was 20.878 billion.

References

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

At January 2, 2022 and January 3, 2021

(Dollars in Millions Except Share and Per Share Amounts) (Note 1)


	2021		2020
Assets
Current assets
Cash and cash equivalents (Notes 1 and 2)	$	14,487			13,985
Marketable securities (Notes 1 and 2)	17,121			11,200
Accounts receivable trade, less allowances for doubtful accounts $230 (2020, $293)	15,283			13,576
Inventories (Notes 1 and 3)	10,387			9,344

Prepaid expenses and other receivables	3,701			3,132
Total current assets	60,979			51,237
Property, plant and equipment, net (Notes 1 and 4)	18,962			18,766
Intangible assets, net (Notes 1 and 5)	46,392			53,402
Goodwill (Notes 1 and 5)	35,246			36,393
Deferred taxes on income (Note 8)	10,223			8,534
Other assets	10,216			6,562
Total assets	$	182,018			174,894
Liabilities and Shareholders’ Equity
Current liabilities
Loans and notes payable (Note 7)	$	3,766			2,631
Accounts payable	11,055			9,505
Accrued liabilities	13,612			13,968
Accrued rebates, returns and promotions	12,095			11,513
Accrued compensation and employee related obligations	3,586			3,484
Accrued taxes on income (Note 8)	1,112			1,392
Total current liabilities	45,226			42,493
Long-term debt (Note 7)	29,985			32,635
Deferred taxes on income (Note 8)	7,487			7,214
Employee related obligations (Notes 9 and 10)	8,898			10,771
Long-term taxes payable (Note 1)	5,713			6,559
Other liabilities	10,686			11,944
Total liabilities	107,995			111,616
Commitments and Contingencies (Note 19)
Shareholders’ equity
Preferred stock — without par value (authorized and unissued 2,000,000 shares)	—			—
Common stock — par value $1.00 per share (Note 12) (authorized 4,320,000,000 shares; issued 3,119,843,000 shares)	3,120			3,120
Accumulated other comprehensive income (loss) (Note 13)	(13,058)			(15,242)
Retained earnings	123,060			113,890
	113,122			101,768
Less: common stock held in treasury, at cost (Note 12) (490,878,000 shares and 487,331,000 shares)	39,099			38,490
Total shareholders’ equity	74,023			63,278
Total liabilities and shareholders’ equity	$	182,018			174,894

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars and Shares in Millions Except Per Share Amounts) (Note 1)


	2021		2020		2019
Sales to customers	$	93,775			82,584		82,059
Cost of products sold	29,855			28,427		27,556
Gross profit	63,920			54,157		54,503
Selling, marketing and administrative expenses	24,659			22,084		22,178
Research and development expense	14,714			12,159		11,355
In-process research and development (Note 5)	900			181		890
Interest income	(53)			(111)		(357)
Interest expense, net of portion capitalized (Note 4)	183			201		318
Other (income) expense, net	489			2,899		2,525
Restructuring (Note 20)	252			247		266
Earnings before provision for taxes on income	22,776			16,497		17,328
Provision for taxes on income (Note 8)	1,898			1,783		2,209
Net earnings	$	20,878			14,714		15,119

Net earnings per share (Notes 1 and 15)
Basic	$	7.93			5.59		5.72
Diluted	$	7.81			5.51		5.63
Average shares outstanding (Notes 1 and 15)
Basic	2,632.1			2,632.8		2,645.1
Diluted	2,674.0			2,670.7		2,684.3

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Millions) (Note 1)


	2021		2020		2019
Net earnings	$	20,878			14,714		15,119

Other comprehensive income (loss), net of tax
Foreign currency translation	(1,079)			(233)		164

Securities:
Unrealized holding gain (loss) arising during period	(4)			1		—
Reclassifications to earnings	—			—		—
Net change	(4)			1		—

Employee benefit plans:
Prior service credit (cost), net of amortization	(169)			1,298		(18)
Gain (loss), net of amortization	4,318			(1,135)		(714)
Effect of exchange rates	106			(229)		(1)
Net change	4,255			(66)		(733)

Derivatives & hedges:
Unrealized gain (loss) arising during period	(199)			1,000		(107)
Reclassifications to earnings	(789)			(53)		7
Net change	(988)			947		(100)

Other comprehensive income (loss)	2,184			649		(669)

Comprehensive income	$	23,062			15,363		14,450

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in Millions) (Note 1)


	Total		RetainedEarnings		AccumulatedOtherComprehensiveIncome (Loss)		Common StockIssued Amount		TreasuryStockAmount
Balance, December 30, 2018	$	59,752			106,216			(15,222)			3,120		(34,362)

Net earnings	15,119			15,119
Cash dividends paid ($3.75 per share)	(9,917)			(9,917)
Employee compensation and stock option plans	1,933			(758)							2,691
Repurchase of common stock	(6,746)									(6,746)
Other	(1)			(1)
Other comprehensive income (loss), net of tax	(669)					(669)
Balance, December 29, 2019	59,471			110,659			(15,891)			3,120		(38,417)

Net earnings	14,714			14,714
Cash dividends paid ($3.98 per share)	(10,481)			(10,481)
Employee compensation and stock option plans	2,217			(931)							3,148
Repurchase of common stock	(3,221)									(3,221)
Other	(71)			(71)
Other comprehensive income (loss), net of tax	649					649
Balance, January 3, 2021	63,278			113,890			(15,242)			3,120		(38,490)

Net earnings	20,878			20,878
Cash dividends paid ($4.19 per share)	(11,032)			(11,032)
Employee compensation and stock option plans	2,171			(676)							2,847
Repurchase of common stock	(3,456)									(3,456)

Other comprehensive income (loss), net of tax	2,184					2,184
Balance, January 2, 2022	$	74,023			123,060			(13,058)			3,120		(39,099)

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Millions) (Note 1)


	2021		2020		2019
Cash flows from operating activities
Net earnings	$	20,878			14,714		15,119
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization of property and intangibles	7,390			7,231		7,009
Stock based compensation	1,135			1,005		977

Asset write-downs	989			233		1,096
Contingent consideration reversal	—			(1,148)		—
Net gain on sale of assets/businesses	(617)			(111)		(2,154)

Deferred tax provision	(2,079)			(1,141)		(2,476)
Credit losses and accounts receivable allowances	(48)			63		(20)
Changes in assets and liabilities, net of effects from acquisitions and divestitures:
(Increase)/Decrease in accounts receivable	(2,402)			774		(289)
Increase in inventories	(1,248)			(265)		(277)
Increase in accounts payable and accrued liabilities	2,437			5,141		4,060
Increase in other current and non-current assets	(1,964)			(3,704)		(1,054)
(Decrease)/Increase in other current and non-current liabilities	(1,061)			744		1,425
Net cash flows from operating activities	23,410			23,536		23,416
Cash flows from investing activities
Additions to property, plant and equipment	(3,652)			(3,347)		(3,498)
Proceeds from the disposal of assets/businesses, net	711			305		3,265
Acquisitions, net of cash acquired (Note 18)	(60)			(7,323)		(5,810)
Purchases of investments	(30,394)			(21,089)		(3,920)
Sales of investments	25,006			12,137		3,387
Credit support agreements activity, net	214			(987)		338
Other (primarily licenses and milestones)	(508)			(521)		44
Net cash used by investing activities	(8,683)			(20,825)		(6,194)
Cash flows from financing activities
Dividends to shareholders	(11,032)			(10,481)		(9,917)
Repurchase of common stock	(3,456)			(3,221)		(6,746)
Proceeds from short-term debt	1,997			3,391		39
Repayment of short-term debt	(1,190)			(2,663)		(100)
Proceeds from long-term debt, net of issuance costs	5			7,431		3
Repayment of long-term debt	(1,802)			(1,064)		(2,823)
Proceeds from the exercise of stock options/employee withholding tax on stock awards, net	1,036			1,114		954
Credit support agreements activity, net	281			(333)		100
Other	114			(294)		475
Net cash used by financing activities	(14,047)			(6,120)		(18,015)
Effect of exchange rate changes on cash and cash equivalents	(178)			89		(9)
Increase/(Decrease) in cash and cash equivalents	502			(3,320)		(802)
Cash and cash equivalents, beginning of year (Note 1)	13,985			17,305		18,107
Cash and cash equivalents, end of year (Note 1)	$	14,487			13,985		17,305

Supplemental cash flow data
Cash paid during the year for:
Interest	$	990			904		995
Interest, net of amount capitalized	941			841		925
Income taxes	4,768			4,619		4,191


Supplemental schedule of non-cash investing and financing activities
Treasury stock issued for employee compensation and stock option plans, net of cash proceeds/ employee withholding tax on stock awards	$	1,811		1,937		1,736
Conversion of debt	—		27		1

Acquisitions
Fair value of assets acquired	$	61		7,755		7,228
Fair value of liabilities assumed and noncontrolling interests	(1)		(432)		(1,418)
Net cash paid for acquisitions (Note 18)	$	60		7,323		5,810