Student Name: Instructor
Class: McGraw-Hill/Irwin
Problem 02-02
Requirement 1:
Requirement 2:
=
+
Short-term Notes ST Notes LT Notes Contributed Retained
Cash Investments Receivable Land Building Equipment
=
Payable Payable
+
Capital Earnings
Beg. 50,000 500,000 100,000 50,000
=
100,000 100,000
+
100,000 400,000
Totals
=
+
Requirement 3:
Requirement 4:
(a) Total assets $870,000 <–Correct!
Assets
Stockholders’ Equity
$870,000
$590,000
Liabilities
$280,000
East Hill Home Healthcare Services was organized as a corporation. Only a
corporation issues shares of capital stock to its owners in exchange for their
investment, as in transaction (a).
Correct!
Correct!
The transaction between the two stockholders (Event e) was not included in the
tabulation. Since the transaction in (e) occurs between the owners, there is no
effect on the business due to the separate-entity assumption.
Correct!
+
=
+
Transactions during 2013:
Student Name:
Instructor
Class: McGraw-Hill/Irwin
Problem 02-03
Requirement 3: Event (d) explanation
Requirement 4:
Correct! Total Liabilities 110,000
Stockholders’ Equity Correct!
Total Liabilities and
Requirement 5:
Notes receivable 8,000 Contributed capital 102,000
Equipment 65,000 Retained earnings 30,000
Factory building 115,000 Total Stockholders’ Equity 132,000
No effect was recorded for (d). The agreement in (d) involves no exchange or receipt of cash,
goods, or services and thus is not a transaction.
Given Data P02-03:
Cash 19,000$
Investments (short-term) 2,000
Accounts receivable 3,000
Retained earnings 30,000
Transactions during 2012:
a. Purchased short-term investments for cash. 9,000$
b. Loan to supplier (2 year note) 7,000
c. Cost of equipment purchased 18,000
at December 31, 2011
Accounting Records
COUGAR PLASTICS COMPANY
Student Name:
Class:
Problem 02-05
Requirement 3:
Property, plant and equipment 4,562
Long-term investments 3,054
Other non-current assets 3,618
Total assets 28,088
Correct!
Liabilities and Stockholders’ Equity
Current Liabilities
Long-term Liabilities 8,810
Stockholders’ Equity Correct!
Total liabilities and stockholders’ equity 28,088
Correct!
Requirement 4:
Current Ratio 1.13
Correct!
DELL, INC.
McGraw-Hill/Irwin
Instructor
at January 28, 2010
Balance Sheet
Current Assets
Noncurrent Assets Correct!
Given Data P02-05:
ASSETS
Current Assets
Cash $8,352
Short-term investments 740
Receivables and other assets 6,443
Inventories 867
Other 3,749
20,151
Long-term Liabilities 7,370
Stockholders’ equity
Common Stock 11,189
Retained Earnings 20,986
Other stockholders’ equity items (27,904)
2010 transactions:
(dollars in millions)
at January 30, 2009
Balance Sheet
DELL, INC.
Noncurrent Assets
Liabilities and Stockholders’ Equity
Current Liabilities
14,859
Required:
1.
This workbook is organized as follows:
Sheet Name Contents
CP2-3 (this worksheet) CP2-3 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
CP2-3 Comparing Companies within an Industry
Compute the current ratio for both companies. Compared to the industry average (from the Industry Ratio Report), are
these two companies more or less able to satisfy short-term obligations with current assets? How is the current ratio
influenced by these companies’ choice to rent space instead of buying it?
Liquidity
Current Ratio 2.55
Company
Name
Ticker
Symbol
Quick Ratio 1.38 ANF
ARO
Activity AEO
Inventory
5.92 ANN
Payable
GES
Profitability JCG
Gross Profit
Margin
38.99% LTD
Operating
Profit Margin
6.24% JWN
Net Profit
Margin
3.77% PSUN
Return on
Equity
13.11% ROST
Return on
Assets
7.17% BKE
Quality of
Income
0.07 MW
0.72 URBN
Leverage WTSLA
Interest
Coverage
16.39
Total
1.08
Times Interest
16.33
Debt/Total
Total
Assets/Total
1.92
Dividends
Dividend
Payout
19.61%
Dividend Yield 2.22%
Other
Sales
Sales Growth 2.39%
Acquisitions
Advertising-to-
2.39%
Abercrombie & Fitch
J. Crew Group Inc
Ann Taylor Stores
Guess? Inc
COMPANIES USED IN INDUSTRY ANALYSIS
American Eagle Outfitters
Aeropostale Inc
INDUSTRY RATIO REPORT
Retail Family Clothing Stores
Wet Seal Inc.
Urban Outfitters Inc
The Men’s Warehouse Inc
The Buckle Inc
Ross Stores Inc
Pacific Sunwear of California Inc
Nordstrom, Inc.
Limited Brands Inc
Turnover
Days to Sell
Inventory
70.897 days BEBE
Receivables
Turnover
54.24 CHS
Average
Collection
15.07 days PSS
Fixed Asset
Turnover
5.76 DBRN
Total Asset
1.90 FL
Accounts
6.43 GPS
Collective Brands Inc
Chico’s FAS Inc
bebe stores Inc
Gap Inc
Foot Locker, Inc
Dress Barn Inc.
January 31, February 2,
(in thousands, except per share amounts) 2009 2008
$ 473,342 $ 116,061
10,511 503,878
925,359 1,020,834
740,240 625,568
10,706 11,479
251,007 165,810
15,001 24,238
21,363 19,751
Other assets, net
Total assets
Non-current deferred income taxes
Goodwill
Property and equipment, at cost, net of accumulated depreciation and amortization
Total current assets
Long-term investments
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
Short-term investments
Cash and cash equivalents
Current assets:
294,928 286,485
41,471 31,920
59,660 35,486
45,447 47,004
Deferred income taxes
Prepaid expenses and other
Accounts and note receivable
Merchandise inventory
$ 152,068 $ 157,928
$ 75,000 $ –
29,417 49,494
64,695 62,161
6,259 22,803
42,299 54,554
13,726 12,953
18,299 16,285
401,763 376,178
Total liabilities and stockholders’ equity
Total stockholders’ equity
Treasury stock, 43,248 and 43,596 shares, repectively, at cost
Retained earnings
Accumulated other comprehensive (loss) income
Contributed capital
– –
2,485 2,481
LIABILITIES AND STOCKHOLDERS’ EQUITY
Notes payable
Current portion of deferred lease credits
Unredeemed stored value cards and gift certificates
Accrued rent
Other liabilities and accrued expenses
Accrued income and other taxes
Accrued compensation and payroll taxes
Accounts payable
Current liabilities:
share issued; 205,281 and 204,480 shares outstanding , respectively
Total current liabilities
Stockholders’ equity
Common stock, $0.01 par value; 600,000 shared authorized; 249,328 and 248,763 shares
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding
88,314 70,355
39,898 44,837
24,670 35,846
152,882 151,038
– –
Non-current accrued income taxes
Deferred lease credits
Commitments and contingencies
Total non-current liabilities
Other non-current liabilities
Non-current liabilities:
(In thousands, except per share amounts) 2009 2008 2007
Net sales $ 2,988,866 $ 3,055,419 $ 2,794,409
Cost of sales, including certain buying, occupancy and
warehousi
ng
1,814,765 1,632,281 1,453,980
Gross profit 1,174,101 1,423,138 1,340,429
740,742 715,180 665,606
Depreciation
131,219 109,203 88,033
Operating
302,140 598,755 586,790
Other
income, net
17,790 37,626 42,277
22,889 – –
temporary
Income
before
297,041 636,381 629,067
income
Basic
income per
$ 0.87 $ 1.85 $ 1.74
Diluted
Provision for
117,980 236,362 241,708
income per
$ 0.86 $ 1.82 $ 1.70
Weighted average common shares outstanding – basic
205,169 216,119 222,662
Weighted average common shares outstanding – diluted
207,582 220,280 228,384
CP2-3
Home
January 1, February 2, February 3,
(In thousands) 2009 2008 2007
$ 179,061 $ 400,019 $ 387,359
(378) 947 (191)
– – (177)
(27,649) 12,582 (1,180)
– – 878
(49,874) 13,771 (314)
Comprehensive income
Other comprehensive (loss) income
Reclassification adjustment for foreign currenty loss reasinzed in net
Foreign currency translation adjustment
income realted to the disposition of National Logistics Services
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended
Net income
transfer of investment securities from available-for-sale classification
Reclassification adjustment for gain realized in net income realted to the
Unrealized (loss) gain on investments, net of tax
197 242 356
related to ARS
Reclassification adjustment for losses realized in net income due to
Other comprehensive (loss) income:
Accumulated
Shares Deferred Other
Outstanding Common Contributed Retained Treasury Compensation Comprehensive Stockholders’
(1) Stock Capital Earnings Stock (2) Expense Income (loss) Equity
221,897 $ 2,416 $ 369,807 $ 978,855 $ (216,513) $ (1,041) $ 22,028 $ 1,155,552
4,556 45 83,615 – – 1,041 – 84,701
(5,250) – – (146,485) – – (146,485)
– – – – – (314) (314)
– – – (61,521) – – – (61,521)
221,284 2,461 453,418 1,302,345 (362,626) – 21,714 1,417,312
– – – (13,304) – (13,304)
221,284 2,461 453,418 1,289,041 (362,626) – 21,714 1,404,008
1,092 20 39,977 – – – – 39,997
(18,750) – – – (438,291) – – (438,291)
(415) – – – (12,310) – – (12,310)
1,269 – – (6,480) 20,546 – – 14,066
204,480 2,481 493,395 1,601,784 (792,681) – 35,485 1,340,464
453 4 20,179 420 – – – 20,603
Repurchase of common stock from employees
Stock awards
Net income
Repurchase of common stock from employees
of publicly announced programs
Balance at February 2, 2008
Cash dividends ($0.98 per share)
Other comprehensive income, net of tax
Repurchase of common stock as part
Stock awards
(164) – – – (3,432) – – (3,432)
512 – – (4,710) 9,313 – – 4,603
– – – 179,061 – – – 179,061
– – – – – – (49,874) (49,874)
– – – (82,394) – – – (82,394)
Reissuance of treasury stock
Cash dividends ($0.40 per share)
Other comprehensive loss, net of tax
Net income
announced programs
Repurchase of common stock as part of publicly
Stock awards
Other comprehensive loss, net of tax
Adoption of FIN 48
Balance at February 3, 2007
Balance at February 4, 2007
AMERICAN EAGLE OUTFITTERS, INC.
Cash dividends ($0.28 per share)
Balance at January 31, 2006
(in thousands, except per share amounts)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(443) – – – (7,635) – – (7,635)
(4) – (113) – – – – (113)
528 – 109 (2,348) 8,007 – – 5,768
Net income
stock split
Cash paid for fractional shares in three-for-two
Repurchase of common stock from employees
Reissuance of treasury stock
January 31, February 2, February 3,
(In thousands) 2009 2008 2007
Operating activities:
Net income
$ 179,061 $ 400,019 $ 387,359
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization
133,141 110,753 89,698
Stock-based compensation
20,296 33,670 36,556
Prepaid expenses and other
(24,781) (1,334) (4,204)
Other assets, net
390 (3,242) (5,357)
Accounts payable
(3,053) (15,559) 32,345
Unredeemed gift cards and gift certificates
(11,392) (699) 11,623
Deferred lease credits
18,887 4,640 7,791
(20,697) (31,416) 43,482
(19,188) (2,598) 33,047
123,132 64,251 361,909
302,193 464,270 749,268
(265,335) (250,407) (225,939)
– – 12,345
(48,655) (1,772,653) (1,353,339)
393,559 2,126,891 915,952
(1,180) (1,170) (140)
Net cash provided by (used for) investing activities
78,389 102,661 (651,121)
Financing activities:
Payments on note payable and capital leases
(2,177) (1,912) (3,020)
Proceeds from issuance of note payable
75,000 – 2,025
Repurchase of common stock as part of publicly announced programs
– (438,291) (146,485)
(3,432) (12,310) (7,635)
– – (113)
3,799 13,183 28,447
693 6,156 19,541
(82,394) (80,796) (61,521)
(8,511) (513,970) (168,761)
(14,790) 3,363 (178)
357,281 56,324 (70,792)
116,061 59,737 130,529
Cash and cash equivalents – end of period
AMERICAN EAGLE OUTFITTERS, INC.
For the Years Ended
CONSOLIDATED STATEMENTS OF CASH FLOWS
24,469 (8,147) (27,572)
1,121 7,260 25,465
(693) (6,156) (19,541)
(1,141) 1,221 687
6,713 592 –
22,889 – –
(13,735) (19,074) (53,527)
(10,094) (5,660) 7,448
2009 2008
$ 316,035 $ 49,912
49,948 141,883
and $966, respectively 36,390 14,324
Total Liabilities and Shareholders’ Equity
Retained earnings
Additional paid-in capital
Preferred shares; $.0001 par value, 10,000,000 shares authorized,
Common shares; $.0001 par value, 200,000,000 shares authorized,
62,955 41,291
11,975 12,673
66,220 79,544
Total current liabilities 141,150 133,508
134,084 74,817
Total Liabilities 275,234 208,325
Accrued compensation
Accrued expenses and other current liabilities
Commitments and contingencies (see Note 11)
Shareholders’ equity:
Deferred rent and other liabilities
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Marketable securities
Accounts receivable, net of allowance for doubtful accounts of $1,229
(in thousands, except share and per share data)
Consolidated Balance Sheets
URBAN OUTFITTERS, INC.
Current Assets:
Cash and cash equivalents
January 31,
ASSETS
Total Assets
Prepaid expenses and other current assets
Deferred taxes
Property and equipment, net
Marketable securities
Deferred income taxes and other assets
2009 2008 2007
Net sales 1,834,618$ 1,507,724$ 1,224,717$
Cost of sales, including certain buying, distribution
and occupancy costs 1,121,140 930,952 772,796
Gross profit 713,478 576,772 451,921
Selling, general and administrative expenses 414,043 351,827 287,932
Income from operations 299,435 224,945 163,989
Interest income 11,504 9,390 6,531
Other income 694 575 353
Consolidated Statements of Income
URBAN OUTFITTERS, INC.
Fiscal Year Ended January 31,
(in thousands, except share and per share data)
Other expenses (2,143) (515) (715)
Income before income tax expense 309,490 234,395 170,158
Income tax expense 110,126 74,164 53,952
Net income per common share:
Weighted average common shares outstanding:
Accumulated
Additional Other
Comprehensive Number of Par Paid-in Unearned Retained Comprehensive
Income Shares Value Capital Compensation Earnings Income (loss) Total
Balances as of February 1, 2006 164,831,477 16$ 138,050$ (3,905)$ 426,190$ 528$ 560,880$
Net Income 116,206$ – – – – 116,206 – 116,206
Foreign currency translation 3,614 – – – – – 3,614 3,614
Unrealized losses on marketable securities,
net of tax 142 – – – – – 142 142
Comprehensive income 119,962$
Share-based compensation – – 3,497 – – 3,497
Unearned compensation reclass – – (3,905) 3,905 – – –
Share-based compensation – – 3,277 – – – 3,277
Exercise of stock options 1,117,152 – 5,000 – – – 5,000
Tax effect of share exercises – – 7,341 – – – 7,341
Balances as of January 31, 2008 166,104,615 17 144,204 – 701,975 7,235 853,431
Net income 199,364 – – – – 199,364 – 199,364
Foreign currency translation (19,866) – – – – – (19,866) (19,866)
Unrealized losses on marketable securities,
net of tax (5,116) – – – – – (5,116) (5,116)
Comprehensive income 174,382$
Share-based compensation – – 3,637 – – – 3,637
Exercise of stock options 1,607,473 – 8,891 – – – 8,891
Tax effect of share exercises – – 13,434 – – – 13,434
Balances as of January 31, 2009 167,712,088 17$ 170,166$ –$ 901,339$ (17,747)$ 1,053,775$
Consolidated Statements of Shareholders’ Equity
URBAN OUTFITTERS, INC.
(in thousands, except share data)
Common Shares
Exercise of stock options 1,375,986 1 6,350 – – – 6,351
Tax effect of share exercises – 5,394 5,394
Share Repurchase (1,220,000) – (20,801) – – – (20,801)
Balances as of January 31, 2007 164,987,463 17 128,586 – 542,396 4,284 675,283
Net income 160,231 – – – – 160,231 – 160,231
Foreign currency translation 703 – – – – – 703 703
FIN48 adjustment – (652) (652)
Unrealized gains on marketable securities,
net of tax 2,248 – – – – – 2,248 2,248
Comprehensive income 163,182$
2009 2008 2007
Cash flows from operating activities:
Net income 199,364$ 160,231$ 116,206$
Accounts payable, accrued expenses and other liabilities (8,868) 75,967 33,600
Net cash provided by operating activities 251,570 254,353 187,117
Cash flows from investing activities:
Cash paid for property and equipment (112,553) (115,370) (212,029)
Cash paid for marketable securities (809,039) (293,633) (182,653)
Sales and maturities of marketable securities 864,685 220,101 193,274
Net cash used in investing activities (56,907) (188,902) (201,408)
Cash flows from financing activities:
Exercise of stock options 8,891 5,000 6,351
Excess tax benefit of stock options exercises 13,434 7,341 5,394
Share repurchases – – (20,801)
Net cash provided by (used in) financing activities 22,325 12,341 (9,056)
Effect of exchange rate changes on cash and cash equivalents (6,224) 212 702
Increase (decrease) in cash and cash equivalents 210,764 78,004 (22,645)
Cash and cash equivalents at beginning of period 105,271 27,267 49,912
Cash and cash equivalents at end of period 316,035$ 105,271$ 27,267$
Supplemental cash flow information:
Cash paid during the year for:
Income taxes 115,040$ 70,765$ 52,535$
Non-cash investing activities – Accrued capital expenditures 6,561$ 6,645$ 14,618$
(in thousands)
Consolidated Statements of Cash Flows
URBAN OUTFITTERS, INC.
Fiscal Year Ended January 31,
Adjustments to reconcile net income to net cash provided by operating activities: