Student Name:
Class:
ELECTROLUX CORPORATION
453,920$
230,707
684,627$
Correct!
Requirement 2:
Straight-line Amortization
Requirement 3:
Bond Payment Schedule
684,627$
64,000$ 82,155$ 18,155$ 702,782
64,000 84,334 20,334 723,116
64,000 86,774 22,774 745,890
64,000 89,507 25,507 771,397
64,000 92,603 28,603 800,000
115,373$
Problem 10-08
McGraw-Hill/Irwin
Instructor
Bond issue price
Interest:
Principal:
12/31/20118
12/31/2017
Why are both stated and effective-interest rates used?
The stated rate of interest is used only to compute the periodic cash interest payments of $64,000. This
12/31/2014
1/1/2014
Bond Issue Price
Requirement 1:
A constant interest rate can be demonstrated each year by dividing interest expense by the net liability – the
answer on all lines will be the effective rate (12%).
12/31/2016
12/31/2015
Student Name:
Class:
Problem 10-08
McGraw-Hill/Irwin
Instructor
Effective-interest amortization is preferable to straight-line because it better measures interest expense (on the
income statement) and the net liability (on the balance sheet). The effective-interest approach is conceptually
sound because interest expense is based on the unpaid balance of the liability. In this case, interest expense
as a percent of the net liability is 12% each period (the effective or true rate) only if the effective-interest
approach is used. If the straight-line approach is used, the interest percent changes each year and ranges
from 11.21% to 12.72%.
Which amortization method should be used? Which method is preferred? Why?
Requirement 4:
A constant interest rate can be demonstrated each year by dividing interest expense by the net liability – the
answer on all lines will be the effective rate (12%).
800,000$
8%
Dec. 31, 2018
12%
ELECTROLUX CORPORATION
Given Data P10-08:
Student Name:
Class:
100,000$ Correct!
912,800
1,359,030
2,271,830$ Correct!
December
June 30 31
86,408$ 86,408$
Correct! Correct!
December
June 30 31
100,000$ 100,000$
Correct! Correct!
December
June 30 31
2,258,238$ 2,244,646$
Correct! Correct!
Problem 10-09
McGraw-Hill/Irwin
Instructor
Issue price
Interest expense
VIGELAND CORPORATION
Cash paid
Requirement 4:
Requirement 3:
Requirement 2:
Requirement 1:
Computations
Principal
Interest
Bonds payable
Interest
Present value:
2,000,000$
10%
Dec. 31, 2024
8%
Given Data P10-09:
VIGELAND CORPORATION
Market rate when sold:
Maturity date
Stated interest rate
Maturity (par) value
Student Name:
Class:
Problem 10-12
Date Cash Interest Amortization Balance
48,808$
3,600$ 3,417$ 183$ 48,625
3,600 3,404 196 48,429
3,600 3,390 210 48,219
3,600 3,381 219 48,000
48,000$ Correct!
48,808$ Correct!
Premium Correct!
808$ Correct!
3,600$ Correct!
14,400$ Correct!
7.5% Correct!
7% Correct!
Annual interest expense:
2014 3,417$ Correct!
2015 3,404 Correct!
2016 3,390 Correct!
2017 3,381 Correct!
Long-Term Liabilities
Balance sheet:
48,625 48,429 48,219 48,000
Correct! Correct! Correct! Correct!
McGraw-Hill/Irwin
Instructor
Effective-interest amortization: Evident from the computations in the schedule. The
Requirement 7:
Requirement 4:
Requirement 3:
Requirement 2:
Requirement 1:
How much?
Note: Add $6 to 2012 interest for rounding error
Maturity amount of bonds
Cash received at date of bond issuance
Requirement 5:
MBTA CORPORATION
End of year 2015
Cash disbursed for interest during full life:
Requirement 10:
Requirement 9:
Requirement 8:
Requirement 6:
Method of amortization and explanation:
Stated rate of interest:
End of year 2014
January 1, 2014
(amounts in thousands)
Bond Amortization Schedule
$48,000, plus unamortized premium
Bonds payable, 7.5% Maturity amount
End of year 2017
End of year 2016
Effective rate of interest:
Was there a premium or discount?
Cash disbursed for interest each period:
Date Cash Interest Amortization Balance
48,808$
3,600$ 3,417$ 183$ 48,625
3,600 ? ? 48,429
3,600 ? ? ?
3,600 ? ? 48,000
End of year 2017
End of year 2016
End of year 2015
End of year 2014
January 1, 2014
MBTA CORPORATION
(amounts in thousands)
Bond Amortization Schedule
Given P10-12:
Required:
1.
2.
This workbook is organized as follows:
Sheet Name Contents
CP10-3 (this worksheet) CP10-3 Problem Requirements and Workbook Layout
Industry Ratio Report Industry Ratio Report
AEO Balance Sheets American Eagle Outfitters, Inc. Consolidated Balance Sheets
AEO Income Statements American Eagle Outfitters, Inc. Consolidated Statements of Operations
AEO Stmts of Stockholders’ Eq American Eagle Outfitters, Inc. Consolidated Statements of Stockholders’ Equity
AEO Statements of Cash Flow American Eagle Outfitters, Inc. Consolidated Statements of Cash Flows
Urban Balance Sheets Urban Outfitters, Inc. Consolidated Balance Sheets
Urban Income Statements
Urban Stmts of Stockholders’ Eq Urban Outfitters, Inc. Consolidated Statements of Stockholders’ Equity
Urban Stmts of Cash Flow Urban Outfitters, Inc. Consolidated Statements of Cash Flows
Urban Outfitters, Inc. Consolidated Statements of Income
Examine the statements of cash flow for both companies. What is the primary source for cash flow for both companies?
Two financial ratios (the debt-to equity ratio and times interest earned ratio) are discussed in this chapter. Are they
relevant for these companies? Explain.
CP10-3 Comparing Companies within an Industry
2.67
Company
Name
Ticker
Symbol
1.48 ANF
ARO
AEO
4.92 ASNA
100.820 days BWS
97.49 CHS
12.63 days PSS
7.43 DDS
1.75 DSW
11.55 FL
GCO
GES
42.47% JOSB
12.37% SKS
5.40% SIG
13.61% SSI
9.09% BKE
1.81 PLCE
FINL
MW
92.35 URBN
Total Debt/Total Equity
0.70
1.70
15.24%
1.49%
5.55%
8.87%
2.62
16.10
Other
Advertising-to-Sales
Sales Growth
Capital Acquisitions Ratio
Price/Earnings
Quality of Income
The Children’s Place
The Finish Line Inc.
Leverage
The Men’s Warehouse Inc.
Times Interest Earned
Urban Outfitters
Total Assets/Total Equity
Dividends
Dividend Payout
Dividend Yield
Net Profit Margin
Signet Jewelers Ltd.
Return on Equity
Stage Stores Inc.
Return on Assets
The Buckle Inc.
Profitability
Guess? Inc.
Gross Profit Margin
Jos. A. Bank Clothiers Inc.
Operating Profit Margin
Saks Inc.
Total Asset Turnover
DSW Inc.
Accounts Payable Turnover
Foot Locker Inc.
Genesco Inc.
Receivables Turnover
Chico’s FAS Inc.
Average Collection Period
Collective Brands Inc.
Fixed Asset Turnover
Dillard’s Inc.
Activity
American Eagle Outfitters
Inventory Turnover
Ascena Retail Group, Inc.
Days to Sell Inventory
Brown Shoe Company
Current Ratio
Quick Ratio
Abercrombie & Fitch
Aeropostale Inc.
INDUSTRY RATIO REPORT
CP10-3 Home
Retail Family Clothing Stores
Liquidity
COMPANIES USED IN INDUSTRY ANALYSIS
January 28, January 29,
2012 2011
$ 719,545 $ 667,593
25,499 67,102
378,426 301,208
40,310 36,721
74,947 53,727
48,761 48,059
1,287,488 1,174,410
582,162 643,120
39,832 7,485
11,469 11,472
13,467 19,616
16,384 23,895
$ 1,950,802 $ 1,879,998
Non-current deferred income taxes
Other assets
Total assets
Total current assets
Property and equipment, at cost, net of accumulated depreciation
Intangible assets, at cost, net of accumulated amortization
Goodwill
Short-term investments
Merchandise inventory
Accounts and note receivable
Prepaid expenses and other
Deferred income taxes
(in thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
AMERICAN EAGLE OUTFITTERS, INC.
CP10-3 Home
CONSOLIDATED BALANCE SHEETS
$ 183,783 $ 167,723
42,625 34,954
76,921 70,390
20,135 32,468
44,970 41,001
15,066 16,203
21,901 25,098
405,401 387,837
71,880 78,606
35,471 38,671
21,199 23,813
128,550 141,090
– –
– –
2,496 2,496
552,797 546,597
28,659 28,072
1,771,464 1,711,929
(938,565) (938,023)
1,416,851 1,351,071
$ 1,950,802 $ 1,879,998
Total liabilities and stockholders’ equity
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding
Common stock, $0.01 par value; 600,000 shared authorized; 249,566 and 249,566 shares
issued; 193,848 and 194,366 shares outstanding , respectively
Contributed capital
Accumulated other comprehensive income
Commitments and contingencies
Retained earnings
Treasury stock, 55,718 and 55,200 shares, respectively, at cost
Total stockholders‘ equity
Non-current liabilities:
Deferred lease credits
Non-current accrued income taxes
Other non-current liabilities
Total non-current liabilities
Unredeemed gift cards and gift certificates
Current portion of deferred lease credits
Other liabilities and accrued expenses
Total current liabilities
Current liabilities:
Accounts payable
Accrued compensation and payroll taxes
Accrued rent
Accrued income and other taxes
LIABILITIES AND STOCKHOLDERS’ EQUITY
January 28, January 29, January 30,
2012 2011 2010
$ 151,705 $ 140,647 $ 169,022
– (1,140) 14,506
– 7,541 940
587 4,833 15,781
587 11,234 31,227
$ 152,292 $ 151,881 $ 200,249
Foreign currency translation gain
Other comprehensive income
Comprehensive income
(In thousands)
Net income
Other comprehensive :
Temporary (impairment) recovery related to investment securities, net of tax
Reclassification adjustment for realized losses in net income related to investment securities, net of tax
AMERICAN EAGLE OUTFITTERS, INC.
CP10-3 Home
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended
Accumulated
Shares Other
Outstanding Common Contributed Retained Treasury Comprehensive Stockholders’
(1) Stock Capital Earnings Stock (2) Income (loss) Equity
205,281 $ 2,485 $ 513,574 $ 1,694,161 $ (786,800) $ (14,389) $ 1,409,031
41 1 39,903 – – – 39,904
(18) – – – (247) – (247)
1,528 – – (15,228) 27,792 – 12,564
– – – 169,022 – – 169,022
– – – – 31,227 31,227
– – 922 (83,906) – – (82,984)
206,832 2,486 554,399 1,764,049 (759,255) 16,838 1,578,517
997 10 36,229 – – – 36,239
(15,500) – – – (216,070) – (216,070)
(1,035) – – – (18,041) – (18,041)
3,072 – (45,841) (7,791) 55,343 – 1,711
– – – 140,647 – – 140,647
– – – – – 11,234 11,234
– – 1,810 (184,976) – – (183,166)
194,366 2,496 546,597 1,711,929 (938,023) 28,072 1,351,071
– – 10,532 – – – 10,532
(1,365) – (15,160) – (15,160)
(145) – – – (2,189) – (2,189)
992 – (5,997) (4,261) 16,807 – 6,549
– – – 151,705 – – 151,705
– – – – – 587 587
– – 1,665 (87,909) – – (86,244)
$ 193,848 $ 2,496 $ 552,797 $ 1,771,464 $ (938,565) $ 28,659 $ 1,416,851
Note 1
Note2
Balance at January 28, 2012
600,000 authorized, 249,566 issued and 193,848 outstanding, $0.01 par value common stock at January 28, 2012; 600,000 authorized, 249,566
issued and 194,366 outstanding, $0.01 par value common stock at January 29, 2011; 600,000 authorized, 249,561 issued and 206,832
outstanding (excluding 992 shares of non-vested restricted stock), $0.01 par value common stock at January 30, 2010; The Company has 5,000
authorized, with none issued or outstanding, $0.01 par value preferred stock at January 28, 2012, January 29, 2011, and January 30, 2010.
55,718 shares, 55,200 shares, and 41,737 shares at January 28, 2012, January 29, 2011, and January 30, 2010, respectively. During Fiscal
2011 and Fiscal 2010 and Fiscal 2009, 992 shares, 3,072 shares and 1,528 shares, respectively, were reissued from treasury stock for the
issuance of share-based payments.
Stock awards
Repurchase of common stock as part of publicly announced programs
Repurchase of common stock from employees
Reissuance of treasury stock
Net income
Other comprehensive income, net of tax
Net income
Other comprehensive income, net of tax
Cash dividends and dividend equivalents ($0.93 per share)
Balance at January 29, 2011
Cash dividends and dividend equivalents ($0.44 per share)
Balance at January 30, 2010
Stock awards
Repurchase of common stock as part of publicly announced programs
Repurchase of common stock from employees
Reissuance of treasury stock
Repurchase of common stock from employees
Reissuance of treasury stock
Net income
Other comprehensive income, net of tax
Cash dividends and dividend equivalents ($0.40 per share)
(in thousands, except per share amounts)
Balance at January 31, 2009
Stock awards
AMERICAN EAGLE OUTFITTERS, INC.
CP10-3 Home
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
January 28, January 29, January 30,
2012 2011 2010
$ 151,705 $ 140,647 $ 169,022
– 41,287 44,376
$ 151,705 $ 181,934 $ 213,398
143,156 145,548 139,832
12,341 25,457 34,615
4,207 11,885 (36,027)
356 15,648 7,995
(373) (12,499) (2,812)
(325) 117 6,477
20,730 – –
– 25,674 3,689
(77,311) 18,713 (33,699)
(3,589) (3,790) 6,656
(21,261) (9,045) 12,916
2,444 (1,380) 1,146
17,934 5,232 8,358
3,979 1,713 (3,591)
(7,837) (7,451) 4,667
Accrued compensation and payroll taxes
7,677 (19,618) 25,841
(15,515) 11,999 12,858
938 12,457 (1,993)
87,551 220,660 186,928
239,256 402,594 400,326
(100,135) (84,259) (127,080)
(34,187) (2,801) (2,003)
(193,851) (62,797) –
240,797 177,472 80,353
(87,376) 27,615 (48,730)
(3,256) (2,590) (2,015)
– (30,000) (45,000)
(15,160) (216,070) –
Repurchase of common stock as part of publicly announced programs
(2,189) (18,041) (247)
5,098 7,272 9,044
373 12,499 2,812
– (6,434) (1,414)
(85,592) (183,166) (82,985)
(100,726) (436,530) (119,805)
798 1,394 3,030
– (21,434) (13,864)
– (6) (339)
– – –
– – –
– (21,440) (14,203)
51,952 (26,367) 220,618
667,593 693,960 473,342
$ 719,545 $ 667,593 $ 693,960
Effect of exchange rates on cash
Net cash used for discontinued operations
Net (increase) decrease in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of period
Repayment of note payable
Net cash used for financing activities
Repurchase of common stock from employees
Net proceeds from stock options exercised
Excess tax benefit from share-based payments
Cash used to net settle equity awards
Cash dividends paid
Net cash used for financing activities from continuing operations
Effect of exchange rates on cash
Cash flows of discontinued operations
Net cash used for operating activities
Net cash used for investing activities
Purchase of available-for-sale securities
Sale of available-for-sale securities
Net cash (used for) provided by investing activities from continuing operations
Financing activities:
Payments on capital leases
Total adjustments
Net cash provided by operating activities from continuing operations
Investing activities:
Capital expenditures for property and equipment
Acquisition of intangible assets
Accounts payable
Unredeemed gift cards and gift certificates
Deferred lease credits
Accrued income and other taxes
Accrued liabilities
Changes in assets and liabilities:
Merchandise inventory
Accounts receivable
Prepaid expenses and other
Other assets
Tax benefit from share-based payments
Excess tax benefit from share-based payments
Foreign currency transaction (gain) loss
Loss on impairment of assets
Realized investment losses
Income from continuing operations
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization
Share-based compensation
Provision for deferred income taxes
(In thousands)
Operating activities:
Net income
Loss from discontinued operations, net of tax
AMERICAN EAGLE OUTFITTERS, INC.
CP10-3 Home
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
2012 2011
$ 145,273 $ 340,257
89,854 116,420
36,673 36,502
250,073 229,561
69,876 66,886
5,243 14,351
596,992 803,977
684,979 586,346
126,913 351,988
74,824 52,010
1,483,708$ 1,794,321$
95,754 82,904
15,630 20,212
122,082 107,908
233,466 211,024
183,974 171,749
417,440 382,773
– –
15 17
– 27,603
1,077,765 1,394,190
(11,512) (10,262)
1,066,268 1,411,548
1,483,708$ 1,794,321$
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss) income
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
164,413,427 issued and outstanding, respectively
Current Liabilities:
Accounts payable
Accrued compensation
Accrued expenses and other current liabilities
Total current liabilities
Deferred rent and other liabilities
Total Liabilities
Commitments and contingencies (see Note 12)
Shareholders’ equity:
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued
Common shares; $.0001 par value, 200,000,000 shares authorized, 144,633,007 and
Deferred income taxes and other assets
Total Assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Prepaid expenses and other current assets
Deferred taxes
Total current assets
Property and equipment, net
Marketable securities
Cash and cash equivalents
Marketable securities
Accounts receivable, net of allowance for doubtful accounts of $1,614
and $1,015, respectively
Inventories
January 31,
ASSETS
Current Assets:
URBAN OUTFITTERS, INC.
CP10-3 Home
Consolidated Balance Sheets
(in thousands, except share and per share data)
2012 2011 2010
2,473,801$ 2,274,102$ 1,937,815$
1,613,265 1,337,482 1,151,670
860,536 936,620 786,145
575,811 522,417 447,161
284,725 414,203 338,984
5,120 4,669 6,290
553 486 463
(1,567) (2,150) (1,331)
288,831 417,208 344,406
103,580 144,250 124,513
185,251$ 272,958$ 219,893$
1.20$ 1.64$ 1.31$
1.19$ 1.60$ 1.28$
154,025,589 166,896,322 168,053,502
156,191,289 170,333,550 171,230,245
Diluted
Net income
Net income per common share:
Basic
Diluted
Weighted average common shares outstanding:
Other income
Other expenses
Income before income taxes
Income tax expense
Basic
and occupancy costs
Gross profit
Selling, general and administrative expenses
Income from operations
Interest income
Fiscal Year Ended January 31,
Net sales
Cost of sales, including certain buying, distribution
URBAN OUTFITTERS, INC.
CP10-3 Home
Consolidated Statements of Income
(in thousands, except share and per share data)
Accumulated
Additional Other
Comprehensive Number of Par Paid-in Retained Comprehensive
Income Shares Value Capital Earnings Loss Total
167,712,088 17$ 170,166$ 901,339$ (17,747)$ 1,053,775$
219,893$ – – – 219,893 – 219,893
7,173 – – – – 7,173 7,173
1,480 – – – – 1,480 1,480
228,546$
– – 4,766 – – 4,766
846,283 – 3,250 – – 3,250
– – 6,438 – – 6,438
168,558,371 17 184,620 1,121,232 (9,094) 1,296,775
272,958 – – – 272,958 – 272,958
(429) – – – – (429) (429)
(739) – – – – (739) (739)
271,790$
– – 10,725 – – 10,725
2,256,273 – 24,129 – – 24,129
12,847 12,847
(6,401,217) – (204,718) – – (204,718)
164,413,427 17 27,603 1,394,190 (10,262) 1,411,548
185,251 – – – 185,251 – 185,251
(2,285) – – – – (2,285) (2,285)
1,035 – – – – 1,035 1,035
184,001$
– – 3,068 – – 3,068
993,923 – 4,134 – – 4,134
8,995 8,995
(20,774,343) (2) (43,800) (501,676) – (545,478)
144,633,007 15$ –$ 1,077,765$ (11,512)$ 1,066,268$
Balances as of January 31, 2012
Unrealized gains on marketable securities, net of tax
Comprehensive income
Share-based compensation
Stock options and awards
Tax effect of share exercises
Share repurchases
Tax effect of share exercises
Share Repurchases
Balances as of January 31, 2011
Net income
Foreign currency translation
Foreign currency translation
Unrealized losses on marketable securities, net of tax
Comprehensive income
Share-based compensation
Stock options and awards
Share-based compensation
Stock options and awards
Tax effect of share exercises
Balances as of January 31, 2010
Net income
Balances as of January 31, 2009
Net Income
Foreign currency translation
Unrealized gains on marketable securities, net of tax
Comprehensive income
Common Shares
URBAN OUTFITTERS, INC.
CP10-3 Home
Consolidated Statements of Shareholders’ Equity
(in thousands, except share data)
2012 2011 2010
185,251$ 272,958$ 219,893$
108,112 101,105 92,350
(12,150) (8,727) 2,161
(8,995) (12,847) (6,438)
3,068 10,725 4,766
857 119 339
(251) 1,835 (1,825)
(20,817) (43,372) (15,544)
6,317 14,825 (25,619)
21,310 48,492 55,311
282,702 385,113 325,394
(190,010) (143,642) (109,260)
(169,467) (463,129) (806,546)
414,769 571,236 421,040
55,292 (35,535) (494,766)
4,136 24,129 3,250
8,995 12,847 6,438
(545,478) (204,718) –
(532,347) (167,742) 9,688
(631) (603) 2,673
(194,984) 181,233 (157,011)
340,257 159,024 316,035
145,273$ 340,257$ 159,024$
120,847$ 121,341$ 137,490$
21,955$ 8,077$ 12,960$
Share repurchases
Cash paid during the year for:
Income taxes
Non-cash investing activities – Accrued capital expenditures
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information:
Sales and maturities of marketable securities
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Exercise of stock options
Excess tax benefit of stock options exercises
Accounts payable, accrued expenses and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Cash paid for property and equipment
Cash paid for marketable securities
Loss on disposition of property and equipment, net
Changes in assets and liabilities:
Receivables
Inventories
Prepaid expenses and other assets
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Provision for deferred income taxes
Excess tax benefit on share-based compensation
Share-based compensation expense
Fiscal Year Ended January 31,
Cash flows from operating activities:
Net income
URBAN OUTFITTERS, INC.
CP10-3 Home
Consolidated Statements of Cash Flows
(in thousands)