Annual Report Case: Analysis of Balance Sheet and Adjusting Entries

C5. In the CVS annual report in the Supplement to Chapter 16, refer to the balance

sheet and the Summary of Significant Accounting Policies in the notes to the financial

statements.

1. Examine the accounts in the current assets, property and equipment, and current liabili-

ties sections of CVS's balance sheet. Which are most likely to have had year-end adjust-

ing entries? Describe the nature of the adjusting entries. For more information about

the property and equipment section, refer to the notes to the financial statements.

2. Where is depreciation (and amortization) expense disclosed in CVS's financial statements?

3. CVS has a statement on the "Use of Estimates" in its Summary of Significant

Accounting Policies. Read this statement, and tell how important estimates are in

determining depreciation expense.

What assumptions do Accountants use in estimat-

ing depreciation?