Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended

Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http:// investors.target.com using the instructions in Appendix B, and use it to answer the following questions:

a. What was Target’s gross margin percentage for the fiscal year ended February 2, 2019 (2018) and 2017? Use “Sales” for these computations.

b. What was Target’s return on sales percentage for 2018 and 2017? Use “Total revenues” for these computations.

c. Target’s return on sales percentage for 2017 was higher than it was in 2018. Ignoring taxes, how much higher would Target’s 2018 net income have been if its return on sales percentage in 2018 had been the same as for 2017?

The following events apply to Tracey’s Restaurant for the Year 1 fiscal

The following events apply to Tracey’s Restaurant for the Year 1 fiscal year:

1. Started the company when it acquired $21,000 cash from the issue of common stock.

2. Purchased a new cooktop that cost $22,000 cash.

3. Earned $32,000 in cash revenue.

4. Paid $16,000 cash for salaries expense.

5. Paid $7,000 cash for operating expenses.

6. Adjusted the records to reflect the use of the cooktop. The cooktop, purchased on January 1, Year 1, has an expected useful life of five years and an estimated salvage value of $2,000. Use straight-line depreciation. The adjustment was made as of December 31, Year 1.

Required

a. Record the events in accounts under an accounting equation.

b. What amount of depreciation expense would Tracey’s report on the Year 2 income statement?

c. What amount of accumulated depreciation would Tracey’s report on the December 31, Year 2, balance sheet?

d. Would the cash flow from operating activities be affected by depreciation in Year 2?

The following information is available for two different types of businesses for

The following information is available for two different types of businesses for the Year 1 accounting year. Diamond Consulting is a service business that provides consulting services to small businesses.
University Bookstore is a merchandising business that sells books to college students. 

Data for Diamond Consulting

1. Borrowed $80,000 by issuing a note to the bank to start the business.

2. Performed services for clients and collected $60,000 cash.

3. Paid salary expense of $38,400.

Data for University Bookstore

1. Borrowed $80,000 by issuing a note to the bank to start the business.

2. Purchased $38,000 of inventory for cash.

3. Inventory costing $33,600 was sold for $60,000 cash.

4. Paid $4,800 cash for operating expenses.

Required

a. Prepare an income statement, balance sheet, and statement of cash flows for each of the companies.

b. What is different about the income statements of the two businesses?

c. What is different about the balance sheets of the two businesses?

d. How are the statements of cash flow different for the two businesses?

Alcorn Service Company was formed on January 1, Year 1.Events Affecting the

Alcorn Service Company was formed on January 1, Year 1.

Events Affecting the Year 1 Accounting Period

1. Acquired $20,000 cash from the issue of common stock.

2. Purchased $800 of supplies on account.

3. Purchased land that cost $14,000 cash.

4. Paid $800 cash to settle accounts payable created in Event 2.

5. Recognized revenue on account of $10,500.

6. Paid $3,800 cash for other operating expenses.

7. Collected $7,000 cash from accounts receivable.

Information for Year 1 End-of-Period Adjustments

8. Recognized accrued salaries of $3,600 on December 31, Year 1.

9. Had $100 of supplies on hand at the end of the accounting period.

Events Affecting the Year 2 Accounting Period

1. Acquired $15,000 cash from the issue of common stock.

2. Paid $3,600 cash to settle the salaries payable obligation.

3. Paid $9,000 cash in advance to lease office space.

4. Sold the land that cost $14,000 for $14,000 cash.

5. Received $6,000 cash in advance for services to be performed in the future.

6. Purchased $2,400 of supplies on account during the year.

7. Provided services on account of $24,500.

8. Collected $12,600 cash from accounts receivable.

9. Paid a cash dividend of $2,000 to the stockholders.

10. Paid other operating expenses of $2,850.

Information for Year 2 End-of-Period Adjustments

11. The advance payment for rental of the office space (see Event 3) was made on March 1 for a one-year term.

12. The cash advance for services to be provided in the future was collected on October 1 (see Event 5). The one-year contract started on October 1.

13. Had $300 of supplies remaining on hand at the end of the period.

14. Recognized accrued salaries of $4,800 at the end of the accounting period.

Required

a. Identify each event affecting the Year 1 and Year 2 accounting periods as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Record the effects of each event under the appropriate account headings of the accounting equation.

b. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Year 1 and Year 2.

The following information was drawn from the Year 1 accounting records of

The following information was drawn from the Year 1 accounting records of Cozart Merchandisers. 

1. Inventory with a list price of $40,000 was purchased under terms 2/10, net/30.

2. Cozart returned $4,200 of the inventory to the supplier five days after purchase.

3. The accounts payable was settled within the discount period.

4. The inventory was sold for $69,000.

5. Selling and administrative expenses amounted to $12,000.

6. Interest expense paid amounted to $800.

7. Land that cost $15,000 was sold for $20,000 cash.

Required
a. Determine the cost of the inventory sold.

b. Prepare a multistep income statement.

c. Where would the interest expense be shown on the statement of cash flows?

d. How would the sale of the land be shown on the statement of cash flows?

e. Explain the difference between a loss and an expense.

The Kroger Co. was founded in 1883 and is one of the

The Kroger Co. was founded in 1883 and is one of the largest retailers in the world, based on annual sales. Publix Super Markets, Inc. operates 1,167 grocery stores throughout the southeastern and mid- Atlantic United States. It is employee owned, and its stock is not available for purchase by the general public. Publix is usually rated in the top three for customer service among national grocery store chains. The following data were taken from these companies’ 2017 annual reports. All dollar amounts are in millions.

Required

a. Before performing any calculations, speculate as to which company will have the highest gross margin and return-on-sales percentage. Explain the rationale for your decision.

b. Calculate the gross margin percentages for Kroger and Publix.

c. Calculate the return-on-sales percentages for Kroger and Publix.

d. Do the calculations from Requirements b and c confirm your speculations in Requirement a?

The following data were extracted from the 2017 financial statements of Penske

The following data were extracted from the 2017 financial statements of Penske Automotive Group, Inc. This company operates automobile dealerships, mostly in the United States, Canada, and Western Europe, and commercial truck dealerships in Australia, New Zealand, and the United Kingdom. The company had 355 dealerships as of the end of 2017. Dollar amounts are in millions.

Required

a. Compute Penske’s gross margin percentage for 2017 and 2016.

b. Compute Penske’s average days to sell inventory for 2017 and 2016.

c. How much higher or lower would Penske’s earnings before taxes have been in 2017 if its gross margin percentage had been the same as it was in 2016? Show all supporting computations.

The following account titles and balances were taken from the accounting records

The following account titles and balances were taken from the accounting records of Hogan Sales Co. at December 31, Year 2. The company uses the periodic inventory method.

Account Title Balance
Advertising expense ……………………………………… $ 20,800
Interest expense ……………………………………………… 10,000
Merchandise inventory, January 1 ……………………. 36,000
Merchandise inventory, December 31 ……………… 40,200
Miscellaneous expense ……………………………………… 1,600
Purchases ……………………………………………………… 300,000
Purchase returns and allowances ……………………… 5,400
Rent expense ………………………………………………….. 36,000
Salaries expense …………………………………………… 106,000
Sales ……………………………………………………………… 640,000
Sales returns and allowances ………………………….. 16,000
Transportation-in ……………………………………………. 12,400
Transportation-out …………………………………………. 21,600
Gain on sale of land ………………………………………….. 8,000
Utilities expense …………………………………………….. 22,400

Required

a. Prepare a schedule to determine the amount of cost of goods sold.

b. Prepare a multistep income statement.

c. Prepare a single-step income statement.

Ruby Tuesday’s, Inc. operated 605 casual dining restaurants across the United States

Ruby Tuesday’s, Inc. operated 605 casual dining restaurants across the United States as of June 6, 2017. Signet Jewelers Limited claims to be the world’s largest retailer of diamond jewelry. Its stores include Zales, Jared, Kay Jewelers, and Piercing Pagoda. As of February 3, 2018, it had over 3,000 retail outlets. The following data were taken from these companies’ annual reports. All dollar amounts are in millions.

Required

a. Before performing any calculations, speculate as to which company will take the longest to sell its inventory. Explain the rationale for your decision.

b. Calculate the inventory turnover ratios for Ruby Tuesday’s and Signet.

c. Calculate the average days to sell inventory for Ruby Tuesday’s and Signet.

d. Do the calculations from Requirements b and c confirm your speculations in Requirement a?

The following transactions pertain to the operations of Ewing Company for Year

The following transactions pertain to the operations of Ewing Company for Year 2:

1. Acquired $30,000 cash from the issue of common stock.

2. Provided $65,000 of services on account.

3. Paid $22,000 cash on accounts payable.

4. Performed services for $8,000 cash.

5. Collected $51,000 cash from accounts receivable.

6. Incurred $37,000 of operating expenses on account.

7. Paid $6,500 cash for one year’s rent in advance.

8. Paid a $4,000 cash dividend to the stockholders.

9. Paid $1,200 cash for supplies to be used in the future.

10. Recognized $3,100 of accrued salaries expense.

Required

a. Classify the cash flows from these transactions as operating activities (OA), investing activities (IA), or financing activities (FA). Use NA for transactions that do not affect the statement of cash flows.

b. Prepare a statement of cash flows. The beginning cash balance was $6,700.