Gap Inc.'s Sales, Cost of Goods Sold, and Gross Profit

The consolidated balance sheets of Gap Inc. included merchandise inventory in the amount of $1,608 as of January 30, 2016 (the end of fiscal year 2015) and $1,621 as of January 31, 2015 (the end of fiscal year 2014). Net sales were $14,533 and $14,679 at the end of fiscal years 2015 and 2014, respectively. Cost of goods sold and occupancy expenses were $9,256 and $8,752 at the end of fiscal years 2015 and 2014, respectively. All amounts are from Gap Inc.s 2015 Form 10-K.

Required:

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1. Gap Inc. does not include accounts receivable on its balance sheet, most likely due to

A prohibition by its bankers to extend credit to its customers.Credit card sales and a lack of sales on credit.Rich clients who always pay cash.Sales Returns and AllowancesVery few credit transactions which are not reported due to materiality principle.

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2. Identify and analyze the transaction to record sales during the year ended January 30, 2016.

Activity	FinancingInvestingOperating
Accounts	Cash Increase, Sales IncreaseCash Increase, Sales DecreaseCash Decrease, Sales IncreaseCash Decrease, Sales Decrease
Statement(s)	Balance Sheet onlyBalance Sheet and Income StatementIncome Statement only

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How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank or enter "0". If the effect is negative, use the minus sign. Enter amounts in millions of dollars. For example, 12,400,000,000 would be entered as 12,400.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

Accounts PayableAccounts ReceivableCashInventoryPurchasesSalesNo Entry

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Accounts PayableAccounts ReceivableCashInventoryPurchasesSalesNo Entry

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Accounts PayableAccounts ReceivableCashInventoryPurchasesSalesNo Entry

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Accounts PayableAccounts ReceivableCashInventoryPurchasesSalesNo Entry

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3. Gap Inc. sets forth net sales but not gross sales on its income statement. What type(s) of deduction(s) would be made from gross sales to arrive at the amount of net sales reported?

Cost of goods soldPurchase discountsPurchasesSales returns and allowances

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4. Reconstruct the Cost of Goods Sold section of Gap Inc.'s 2015 income statement. Enter amounts in millions of dollars. For example, 12,400,000,000 would be entered as 12,400.

Gap Inc. Cost of Goods Sold For the Year 2015

Cost of goods sold 1/31/15Merchandise inventory, 1/31/15Merchandise inventory, 1/30/16Sales for the year ended 1/30/16Work in process inventory, 1/31/15	$- Select -
Cost of goods purchasedCost of goods returnedCost of goods soldCost of overheadCost of revenue	- Select -
Cost of goods available for saleCost of goods soldNet incomeNet profitTotal revenue	$- Select -
Merchandise inventory, 1/31/15Merchandise inventory, 1/30/16Purchase discountsReturns and allowancesSales discounts	- Select -
Cost of goods purchasedCost of goods returnedCost of goods soldCost of sales discountsCost of sales returns	$- Select -

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5. Calculate the gross profit ratios for Gap Inc. for 2015 and 2014. If required, round the percentage to one decimal place.

Gap's 2015 gross profit ratio:	fill in the blank 2d5678fd7fc2063_1 %
Gap's 2014 gross profit ratio:	fill in the blank 2d5678fd7fc2063_2 %

Is the company's perform