COMPARATIVE ANALYSIS: ABERCROMBIE & FITCH vs.

AEROPOSTALE Refer to the financial statements of Abercrombie & Fitch and Aeropostale that are supplied with this text.

Required:

Answer the following questions:

. Does each company apply the revenue recognition principle to sales to customers and to gift cards in the same manner?

. Which accounts on the balance sheet and income statement of each company may require adjusting entries? Would these accounts require accruals or deferrals?

. How much would Abercrombie & Fitch credit to Income Summary for the year ending February 3, 2007 (fiscal 2006)? How much would Aeropostale credit to Income Summary for the fiscal year ending February 3, 2007? How much would Abercrombie & Fitch debit to Income Summary for the year ending February 3, 2007 (fiscal 2006)? How much would Aeropostale debit to Income Summary for the fiscal year ending February 3, 2007?

. How much did each company report as an accrued expense for gift cards for the most recent year? Explain why this amount is reported as a liability.

. Compare how much each company reported as income tax expense and as cash paid for taxes for the most recent year. Why are the amounts different and where would this difference be reported on the financial statements?