MBA 4-5

Case 4-1

Obj. 2,4 P4-1 Purchase-related transactions The following selected transactions were completed by Epic Co. during August of the cur rent year: Aug. 3. Purchased merchandise on account for $33.400, terms POR destination, 2/10, 1/30. 9. Issued debit memorandum for $2,500 ($2,450 net of 2% discount for merchandise from the August 3 purchase that was damaged in shipment. 10. Purchased merchandise on account, $25,000, terms FOB shipping point, 1/eom. Paid $600 cash to the freight company for delivery of the merchandise. 13. Paid for invoice of August 3, less debit memorandum of August 9. 31. Paid for invoice of August 10. Instructions Illustrate the effects of each of the preceding transactions on the accounts and financial statements of Epic Co. Identify each transaction by date. Obj. 2,8 MBA 4-1 Purchase transactions Using transactions listed in P-1, indicate the effects of each transaction on the liquidity metric working capital and profitability metrie gross profit percent. Obj. 3,8 MBA 4-2 Sales transactions Using transactions listed in P4-2, indicate the effects of each transaction on the liquidity metric working capital and profitability metric gross profit percent. Indicate the gross profit percent for each sale (rounding to one decimal place) in parentheses next to the effect of the sale on the company's ability to attain an overall gross profit percent of 30% Obj. 6,8 MBA 4-3. Inventory shrinkage Using adjustment data listed in E4-15, indicate the effects the inventory shrinkage adjust- ment on the liquidity metric working capital and profitability metric gross profit percent. Obj. 6,8 MBA 4-4 Customer refunds and returns Using adjustment data listed in EA-16, indicate the effects the adjustment for estimated customer refunds and returns on the liquidity metric working capital and profitability met ric gross profit percent. Indicate in parentheses the effect of the adjustment for sales and cost of goods sold on the company's ability to attain an overall gross profit percent of 30% Obj. MBA 4-5 Gross margin percent and markup percent Target Corp. (TGT) operates retail stores throughout the United States and is a major com- petitor of Wal-Mart. The following data (in millions) were adapted from recent financial statements of Target Year! Sales 572,618 371,279 Cost of goods sold 151,278) 150039 Gross profit $21,340 $21.240 1. Compute the gross profit percent for Years 1 and 2. Round to one decimal place. 2. Compute the average markup percent for years and 2. Round to one decimal place. 3. Compare the results in parts (1) and (2) for Years 1 and 2. Comment on your comparison Obja MBA 4-6 Gross profit percent and markup percent Compare the Target results in MBA 4-5 with those of Wal-Mart (WMT) shown in the chapter illustration Comment on the differences