Question

Please help to identify the correct answer because I have got different answers for this question so I am very confused.

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.

For part a) people have mentioned the omitted assets as $ 958 and then some have mentioned as 2458 + 1539 =3997 and some have mentioned as 3997 - 958 = 3039 as the omitted assets. Please clarify and give proper explanation

Answer 1

SOL! : mentioned the a) People have omitted assets as $958 and then some have mentioned as 2945871539 . 3997 and some have mentioned as 3997-958 3039 as the omitted assets. Assets = $ 958 million. Liabilities = es $284 million of $ unconsolidated affiliated are omitted from cummins balance sheet as a for result of the equity method of accounting those investment. 6 The liabilities of the unconsolidated affiliates of -ct Cummins directly. * The ability of the investee company are not lia -bilities for the investor. * The liability of the investor company are liabilit of the investee.

* The creditor of the of the investee investor company have resource, in the event of defaults. to the assets * liability of the investee company are liabilities for The the investor.