Part 1 Recording Using the financial statements for the hypothetical company - Big Box Retailer-record the transactions for the year to the financial statement. The financial statements may be found in Content under materials for assignments. You may use pencil and paper or Excel. When you are done, compute the following ratios for the current and prior year and type in the chart below. Current Ratio, 2 pts Debt to Asset Ratio, 2pts Gross Margin, 2pts 2023 2022 Explain below in about three to six sentences how the liquidity, solvency, and profitability of BBR changed (improve, decline, or stay about the same) from 2022 to 2023. Your discussion (6 pts) 4 5 Consolidated Statements of Financial Position 6 (millions of dollars) 7 Assets 8 Cash and cash equivalents 9 Inventory 10 Other current assets 11 Total current assets 12 13 14 Property and equipment 15 Land Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 $ 2,577 $ 8,511 $ 5,911 8,992 10,653 13,902 1,333 1,592 1,760 12,902 20,756 21,573 6,036 6,141 6,164 16 Buildings and improvements 29,603 30,757 32,385 17 Fixtures and equipment 9,308 9,459 10,169 18 Accumulated depreciation and 19 amortization on fixtures and equipment financed through leases (19,664) 20 Operating lease assets 7,236 (20,278) 7,227 (21,137) 7,556 21 Amortization on operating leases (4,000) (4,200) 22 Other noncurrent assets 23 Total assets 24 25 26 27 Liabilities and shareholders' investment 28 Accounts payable (4,400) 1,358 1,386 1,501 $ 42,779 $ 51,248 $ 53,811 9,920 $ 29 Accrued Interest and other current liabilities 4,406 30 Current portion of operating lease liabilities 12,859 6,122 15,478 6,098 80 31 Current portion of long-term debt and other borrowings 32 Total current liabilities 500 71 81 644 100 14,487 33 20,125 21,747 34 Long-term debt and other borrowings 35 Noncurrent operating lease liabilities 11,338 11,536 13,549 36 Deferred income taxes 2,275 2,218 2,493 37 Other noncurrent liabilities 1,122 990 1,566 1,724 Big Box Financial Statements 1,939 1,629 READY P R S T U ending balance. 1) The Big Box Retailer (BBR) had sales of $110,000 which were received in cash (or equivalents through credit cards) during the year. The cost of the merchandise sold was $65,000. 2) BBR purchased $62,000 of inventory on account with its vendors. BBR paid its vendors $50,000 in cash against accounts payables. 3) BBR paid its employees $32,000 of which $12,000 was attributable to Cost of Sales and the remainder to Selling, General and Admin. 4) BBR entered into an operating lease to open a new store. The legal fees paid in cash to acquire the lease were $75. The present value of the future lease obligation is $2,200 excluding the initial payment of $275 in cash incurred at inception. 5) During the year, BBR purchased cash registers and other equipment and fixtures for its new store through financing leases. An initial payment was made for $100. The present value of the remaining obligation is $900. 6) Depreciation and amortization expense on the buildings, improvements, fixtures and equipment is $3,000, of which, $2,000 relates to cost of sales. 7) Lease expense related to operating leases for the year is $1,250 and is all attributed to cost of sales. The liability on these leases was reduced by $850. The reduction in the right- to-use assets is $500 and cash paid out for these leases was $1200. 8) Payments were made on long-term debt and borrowings in the amount of $9,000. This amount consisted of interest of $450 and principle payments of $8550. Record all of the interest to the income statement as expense. J4 A B 34 Long-term debt and other borrowings 35 Noncurrent operating lease liabilities 36 Deferred income taxes 37 Other noncurrent liabilities 38 Total noncurrent liabilities 39 40 Shareholders' investment 41 Common stock C D E F G H 11,338 11,536 13,549 2,275 2,218 2,493 1,122 990 1.566 1,724 1,939 1,629 16,459 16,683 19,237 42 42 39 42 Additional paid-in capital 6,226 6,329 6,421 43 Retained earnings 6,433 8,825 6,920 44 Accumulated other comprehensive loss (868) (756) (553) 45 Total shareholders' investment 11,833 14,440 12,827 46 Total liabilities and shareholders' investment $ 42,779 $ 51,248 $ 53,811 47 48 49 Consolidated Statements of Operations 50 (millions) 51 52 Sales 2020 78.112 Years Ending December 31, 2021 2022 93,561 $ 106,005 + 53 54 Cost of sales 54,864 66,177 74,963 55 Selling, general and administrative expenses 16,233 18,615 19,752 56 Depreciation and amortization* 2,357 2,230 2,344 57 Operating income- 58 4,658 6,539 8,946 59 Net interest expense. 477 977 60 Net other (income)/ expense 421 (21) 16 61 Earnings from continuing operations before income taxes (382) 4,202 5,546 62 Provision for income taxes 8,907 921 63 Net earnings 1,178 1,961 3,281 S 4,368 64 $ 6,946 65 66 67 68 *Depreciation and amortization (exclusive of depreciation included in cost of sales) 69 7) Lease expense related to operating leases for the year is $1,250 and is all attributed to cost of sales. The liability on these leases was reduced by $850. The reduction in the right- to-use assets is $500 and cash paid out for these leases was $1200. 8) Payments were made on long-term debt and borrowings in the amount of $9,000. This amount consisted of interest of $450 and principle payments of $8550. Record all of the interest to the income statement as expense. 8) The classification of long-term debt and current portion of operating lease liabilities did not change and many other accounts did not change during the year. (No entry required.) 9) Taxes expense is $1600 and taxes paid is $1600. There was NO other income/expense. A B 70 71 Consolidated Statements of Cash Flows 72 (millions) C D 2020 Years Ending December 31, 2021 2022 73 Operating activities 74 Net earnings $ 3,281 S 4,368 $ 6,946 75 Earnings from discontinued operations, net of tax 12 0 76 Net earnings 3,269 4,368 6,946 77 78 Adjustments to reconcile net earnings to cash provided by operations: 79 Depreciation and amortization 2,604 2,485 2,642 80 Share-based compensation expense 147 200 228 81 Deferred income taxes 178 (184) 522 82 Loss on debt extinguishment 10 512 83 Noncash losses / (gains) and other, net 29 86 (268) 84 Changes in operating accounts: 85 Inventory 505 (1,661) (3,249) 86 Other assets 18 (137) (78) 87 Accounts payable 140 2,925 2,628 88 Accrued and other liabilities 199 1,931 (746) 89 Cash provided by operating activities-continuing operations 7,099 10,525 8,625 90 Cash provided by operating activities-discontinued operations 18 91 Cash provided by operations 7,117 92 93 Investing activities 10,525 8,625 4 94 Expenditures for property and equipment 95 Proceeds from disposal of property and equipment 96 Other 97 Cash required for investing activities 98 (3,027) (2,649) (3,544) 63 42 27 20 16 363 (2,944) (2,591) (3,154) 99 Financing activities 00 Additions to long-term debt 101 Reductions of long-term debt 102 Dividends paid 103 Repurchase of stock 1,739 2,480 1,972 (2,069) (2,415) (1,147) (1,330) (1,343) (1,548) (1,565) (745) (7,356) 104 Stock option exercises 73 105 Cash required for financing activities (3,152) 106 23 (2,000) (8,071) 8 07 Net increase / (decrease) in cash and cash equivalents 1,021 5,934 12.6001