Notes to Consolidated Financial Statements (partial) 1.1. Description of Business PVH Corp. constitutes a global apparel company with a brand portfolio consisting of nationally and internationally recognized trademarks, including TOMMY HILFIGER, CALVIN KLEIN, Van Heusen, IZOD, ARROW, Warner's, Olga, True&Co. and Geoffrey Beene, which are owned, as well as various other owned, licensed and, to a lesser extent, private label brands. The Company designs and markets branded dress shirts, neckwear, sportswear (casual apparel), jeanswear, performance apparel, intimate apparel, underwear, swimwear, swim products, handbags, accessories, footwear and other related products and licenses its owned brands globally over a broad array of product categories and for use in numerous discrete jurisdictions. 1.4. Fiscal Year The Company uses a 52-53 week fiscal year ending on the Sunday closest to February 1. Results for fiscal years 2019, 2018 and 2017 represent the 52 weeks ended February 2, 2020, 52 weeks ended February 3, 2019 and 53 weeks ended February 4, 2018, respectively. 1.10. Property and Equipment Property and equipment consisted of the following (in millions): As of 2/2/2020 2/3/2019 Land $1 $1 Buildings and building improvements 53 55 Machinery, software and equipment 872 698 Furniture and fixtures 586 Shop-in-shops/concession locations 210 231 Leasehold improvements 849 790 Construction-in-progress 35 84 Total property and equipment 2,606 2,399 Accumulated depreciation (1,579) (1,414) Property and equipment, net $ 1,027 $ 985 540 Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is generally provided over the estimated useful lives of the related assets on a straight-line basis. The range of useful lives is as follows: Buildings and building improvements - 15 to 40 years; machinery, software and equipment - 2 to 10 years; furniture and fixtures 2 to 10 years, and fixtures located in shop-in-shop/concession locations and their related costs 3 to 4 years. Leasehold improvements are depreciated using the straight-line method over the lesser of the term of the related lease or the estimated useful life of the asset. Depreciation expense totaled $275 million and $264 million in fiscal years 2019 and 2018, respectively. 8. Goodwill and Other Intangible Assets Goodwill and indefinite-lived intangible assets not subject to amortization are tested for impairment annually, at the beginning of the third quarter of each fiscal year, and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the carrying amount may be impaired. There was no impairment of goodwill in fiscal 2019 or 2018 respectively. Purchased intangible assets with finite lives are amortized over their estimated useful lives using the straight- line and are tested for impairment. Amortization expense related to the Company's intangible assets subject to amortization was $40 million and $63 million for fiscal year 2019 and 2018, respectively. On July 1, 2019, the Company acquired the Tommy Hilfiger retail business in Central and Southeast Asia (the TH CSAP acquisition). As a result of the TH CSAP acquisition, the Company acquired $64 million of goodwill. On May 31, 2019, the Company acquired approximately 78% ownership interests in Gazal Corporation Limited (Gazal") that it did not already own (the "Australia acquisition"). Prior to May 31, 2019, the Company accounted for its approximately 22% interest in Gazal. The Company did not acquire any companies during fiscal 2018. The following reflects goodwill activity for fiscal 2019 and 2018 (in millions): Goodwill balance as of February 4, 2018 $_3835 Acquisitions 0 Other (164) Goodwill balance as of February 3, 2019 $ 3.671 Acquisitions 130 Other _4123) Goodwill balance as of February 2, 2020 $ 3.678 Problem 2 (11 points) Use PVH Corp.'s financial statements to answer to the following questions. 1. Provide the fiscal year 2019 adjusting journal entry (both accounts and amounts) that PVH made to record depreciation on its Property and Equipment. Assume that PVH makes one adjusting journal entry for depreciation expense at the end of each fiscal year as part of its adjusting entries. (3 points) 2. According to the footnotes, what is the TOTAL COST of the Property and Equipment that PVH owns as of February 2, 2020? (1 point) $ 3. According to the footnotes, what is the TOTAL COST of Land that PVH owns as of February 2, 2020? (1 point) $ 4. According to the footnotes, which of the following methods does PVH use to depreciate its Property and Equipment? (Circle one) (1 point) Straight-Line Double-Declining- Balance Units-of-Activity 5. Provide the fiscal year 2019 adjusting journal entry (both accounts and amounts) that PVH made to record amortization on its finite-lived Intangible Assets. Assume that PVH makes one adjusting journal entry for amortization expense at the end of each fiscal year as part of its adjusting entries. (3 points) 6. Does PVH's Goodwill footnote suggest that the company acquired any other companies during fiscal 2019? (Circle one) (1 point) YES NO 6. Does PVH's Goodwill footnote suggest that the company acquired any other companies during fiscal 2019? (Circle one) (1 point) YES NO 7. Does PVH's Goodwill footnote suggest that the company acquired any other companies during fiscal 2018? (Circle one) (1 point) YES NO 5 PVH Corp. Financial Statements (partial) As of Feb. 3, 2019 $ 452 778 PVH Consolidated Balance Sheets In millions of dollars As of ASSETS Feb. 2, 2020 Cash and cash equivalents $ 503 Accounts receivable, net of the allowance of $21 million 741 as of 2/2/2020 and of $22 million as of 2/3/2019 Inventories 1,616 Prepaid expenses and other current assets 534 Total current assets $ 3,394 Property, plant, and equipment, net 1,027 Goodwill 3,678 Tradenames 2,830 Other intangibles, net 650 Other long-term assets 2,052 Total assets $ 13,631 1,732 277 $ 3.239 985 3,671 2,863 705 401 $ 11,864 PVH Corp. Financial Statements (partial) PVH Consolidated Balance Sheets In millions of dollars As of Feb. 2, 2020 $ 503 As of Feb. 3, 2019 $_452 741 778 ASSETS Cash and cash equivalents Accounts receivable, net of the allowance of $21 million as of 2/2/2020 and of $22 million as of 2/3/2019 Inventories Prepaid expenses and other current assets Total current assets Property, plant, and equipment, net Goodwill 1,732 277 $ 3.239 1,616 534 $ 3,394 1,027 3,678 2,830 985 3,671 2,863 Tradenames 650 705 Other intangibles, net Other long-term assets 2,052 401 Total assets $ 13,631 $ 11,864 $ 883 $ 924 929 892 65 65 LIABILITIES & EQUITY Account payable Accrued expenses Unearned revenue Short-term borrowings and other current liabilities Total current liabilities Long-term debt Other long-term liabilities 484 13 2,361 2,694 2,765 7,820 3,161 1,894 2,819 1,323 Total liabilities 6,036 3,103 Common stock 2,725 Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 2,650 5,811 $ 13,361 5,828 $ 11,864 Notes to Consolidated Financial Statements (partial) 1.1. Description of Business PVH Corp. constitutes a global apparel company with a brand portfolio consisting of nationally and internationally recognized trademarks, including TOMMY HILFIGER, CALVIN KLEIN, Van Heusen, IZOD, ARROW, Warner's, Olga, True&Co. and Geoffrey Beene, which are owned, as well as various other owned, licensed and, to a lesser extent, private label brands. The Company designs and markets branded dress shirts, neckwear, sportswear (casual apparel), jeanswear, performance apparel, intimate apparel, underwear, swimwear, swim products, handbags, accessories, footwear and other related products and licenses its owned brands globally over a broad array of product categories and for use in numerous discrete jurisdictions. 1.4. Fiscal Year The Company uses a 52-53 week fiscal year ending on the Sunday closest to February 1. Results for fiscal years 2019, 2018 and 2017 represent the 52 weeks ended February 2, 2020, 52 weeks ended February 3, 2019 and 53 weeks ended February 4, 2018, respectively. 1.10. Property and Equipment Property and equipment consisted of the following (in millions): As of 2/2/2020 2/3/2019 Land $1 $1 Buildings and building improvements 53 55 Machinery, software and equipment 872 698 Furniture and fixtures 586 Shop-in-shops/concession locations 210 231 Leasehold improvements 849 790 Construction-in-progress 35 84 Total property and equipment 2,606 2,399 Accumulated depreciation (1,579) (1,414) Property and equipment, net $ 1,027 $ 985 540 Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is generally provided over the estimated useful lives of the related assets on a straight-line basis. The range of useful lives is as follows: Buildings and building improvements - 15 to 40 years; machinery, software and equipment - 2 to 10 years; furniture and fixtures 2 to 10 years, and fixtures located in shop-in-shop/concession locations and their related costs 3 to 4 years. Leasehold improvements are depreciated using the straight-line method over the lesser of the term of the related lease or the estimated useful life of the asset. Depreciation expense totaled $275 million and $264 million in fiscal years 2019 and 2018, respectively. 8. Goodwill and Other Intangible Assets Goodwill and indefinite-lived intangible assets not subject to amortization are tested for impairment annually, at the beginning of the third quarter of each fiscal year, and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the carrying amount may be impaired. There was no impairment of goodwill in fiscal 2019 or 2018 respectively. Purchased intangible assets with finite lives are amortized over their estimated useful lives using the straight- line and are tested for impairment. Amortization expense related to the Company's intangible assets subject to amortization was $40 million and $63 million for fiscal year 2019 and 2018, respectively. On July 1, 2019, the Company acquired the Tommy Hilfiger retail business in Central and Southeast Asia (the TH CSAP acquisition). As a result of the TH CSAP acquisition, the Company acquired $64 million of goodwill. On May 31, 2019, the Company acquired approximately 78% ownership interests in Gazal Corporation Limited (Gazal") that it did not already own (the "Australia acquisition"). Prior to May 31, 2019, the Company accounted for its approximately 22% interest in Gazal. The Company did not acquire any companies during fiscal 2018. The following reflects goodwill activity for fiscal 2019 and 2018 (in millions): Goodwill balance as of February 4, 2018 $_3835 Acquisitions 0 Other (164) Goodwill balance as of February 3, 2019 $ 3.671 Acquisitions 130 Other _4123) Goodwill balance as of February 2, 2020 $ 3.678 Problem 2 (11 points) Use PVH Corp.'s financial statements to answer to the following questions. 1. Provide the fiscal year 2019 adjusting journal entry (both accounts and amounts) that PVH made to record depreciation on its Property and Equipment. Assume that PVH makes one adjusting journal entry for depreciation expense at the end of each fiscal year as part of its adjusting entries. (3 points) 2. According to the footnotes, what is the TOTAL COST of the Property and Equipment that PVH owns as of February 2, 2020? (1 point) $ 3. According to the footnotes, what is the TOTAL COST of Land that PVH owns as of February 2, 2020? (1 point) $ 4. According to the footnotes, which of the following methods does PVH use to depreciate its Property and Equipment? (Circle one) (1 point) Straight-Line Double-Declining- Balance Units-of-Activity 5. Provide the fiscal year 2019 adjusting journal entry (both accounts and amounts) that PVH made to record amortization on its finite-lived Intangible Assets. Assume that PVH makes one adjusting journal entry for amortization expense at the end of each fiscal year as part of its adjusting entries. (3 points) 6. Does PVH's Goodwill footnote suggest that the company acquired any other companies during fiscal 2019? (Circle one) (1 point) YES NO 6. Does PVH's Goodwill footnote suggest that the company acquired any other companies during fiscal 2019? (Circle one) (1 point) YES NO 7. Does PVH's Goodwill footnote suggest that the company acquired any other companies during fiscal 2018? (Circle one) (1 point) YES NO 5 PVH Corp. Financial Statements (partial) As of Feb. 3, 2019 $ 452 778 PVH Consolidated Balance Sheets In millions of dollars As of ASSETS Feb. 2, 2020 Cash and cash equivalents $ 503 Accounts receivable, net of the allowance of $21 million 741 as of 2/2/2020 and of $22 million as of 2/3/2019 Inventories 1,616 Prepaid expenses and other current assets 534 Total current assets $ 3,394 Property, plant, and equipment, net 1,027 Goodwill 3,678 Tradenames 2,830 Other intangibles, net 650 Other long-term assets 2,052 Total assets $ 13,631 1,732 277 $ 3.239 985 3,671 2,863 705 401 $ 11,864 PVH Corp. Financial Statements (partial) PVH Consolidated Balance Sheets In millions of dollars As of Feb. 2, 2020 $ 503 As of Feb. 3, 2019 $_452 741 778 ASSETS Cash and cash equivalents Accounts receivable, net of the allowance of $21 million as of 2/2/2020 and of $22 million as of 2/3/2019 Inventories Prepaid expenses and other current assets Total current assets Property, plant, and equipment, net Goodwill 1,732 277 $ 3.239 1,616 534 $ 3,394 1,027 3,678 2,830 985 3,671 2,863 Tradenames 650 705 Other intangibles, net Other long-term assets 2,052 401 Total assets $ 13,631 $ 11,864 $ 883 $ 924 929 892 65 65 LIABILITIES & EQUITY Account payable Accrued expenses Unearned revenue Short-term borrowings and other current liabilities Total current liabilities Long-term debt Other long-term liabilities 484 13 2,361 2,694 2,765 7,820 3,161 1,894 2,819 1,323 Total liabilities 6,036 3,103 Common stock 2,725 Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 2,650 5,811 $ 13,361 5,828 $ 11,864