ACCT 5131 Collected Homework Assignment 2

ACCT 5131

Collected Homework Assignment #2

Spring 2020

See the Course Schedule in the syllabus for the due date.  Put your answer underneath each question.  You may either type your answers in a Word file or write them neatly.  However, to receive credit, your writing must be readable and your work must be easy to follow. 

Retrieve the Form 10-K for Westlake Chemical Corporation for the year ending December 31, 2019.  Westlake’s Form 10-K can be accessed through the SEC EDGAR database at http://www.sec.gov/edgar/searchedgar/webusers.htm.  The UHCL library subscribes to the SEC EDGAR database.

Hints: You will need to search the financial statement footnotes to find some of the information. Also, the financial statements are in millions, except for per share, number of shares, and par amounts.  If a number is in millions, please indicate this by writing out the full number or writing ‘(in millions)’.  Furthermore, you will not need the information before page 46 in Westlake’s Form 10-K.

1. What were Westlake’s Restructuring, Transaction, and Integration-related costs for the year ending December 31, 2019? What did the restructuring expense portion pertain to?

• Restructuring, Transaction, and Integration-related costs equaled to $37,000,000
• Restructuring expenses represent charges associated with the write-off of certain assets in the Vinyls segment

2. For the years ending December 31, 2019 and December 31, 2018, compute Westlake’s income from operations as a percentage of sales. Show and label your computations. 

• OPP= SALES – (COST OF GOODS SOLD+SALES, GENERAL, AND ADMINISTRATIVE EXPENSES)

                                                      SALES

                  *all numbers computed in millions*

December 31, 2019-  ($8,118M – ($6,858M + $458M))   = 9.8%

                                          $8,118M         

                 December 31, 2018-  ($8,635M – ($6,648M + $445M)).    =17.8%

                                                             $8,635M

3. Based on observation of the income statement, discuss what caused the difference in the ratios you calculated in question 2.

• Based on observation net sales from 2018 versus 2019 were significantly higher. Cost of good was also lower which means that profit margins in 2018 were higher than 2019.

4. At what point does Westlake recognize revenue? State your answer in one sentence.

• Westlake recognizes revenue when the company transfers control of inventories to its customers.

5. What was Westlake’s interest expense for the year ending December 31, 2019?

• Westlake’s interest expense for the year ending December 31, 2019 was $124,000,000

6. What months in 2019 did Westlake perform goodwill impairment tests on its Olefins and Vinyls segments?

• Westlake perform goodwill impairment tests on its Olefins and Vinyls segments in April and October of 2019.

7. What were Westlake’s effective income tax rates for the years ending December 31, 2019 and December 31, 2018? Show and label your computations.

• Effective income tax rates = total income tax expenses / income earned before taxes
• 2019 effective income tax rates is (108/570) = 18.9%
• 2018 effective income tax rates is (300/1,334) = 22.4%

8. What was Westlake’s diluted earnings per common share (pertaining to Westlake Chemical Corp.) for the year ending December 31, 2019?

• Westlake’s diluted earnings per common share was $3.25.

9. For the year ending December 31, 2019, list the two major categories of items that were a part of Westlake’s other comprehensive income (loss).

• the two major categories of items that were a part of Westlake’s other comprehensive income (loss) were pension/other post-retirement benefits and foreign currency translation adjustments.

10. For the year ending December 31, 2019, what was the total dollar amount of Westlake’s cash dividends declared. Do not include distributions to non-controlling interests.  Hint: For a fiscal year, the cash dividends declared does not always equal the cash dividends paid.

• Westlake’s cash dividends declared per share was $1,025,000.