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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)

— 

          Reclassifications to earnings

— 

— 

— 

          Net change

(4)

— 

      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)

          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

7,431 

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 

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 

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