Problem 1

Access the 2016 Annual Report for The GAP online from the companys website. Review the financial statements and the notes to the financial statements.

1. What is The GAPs fiscal year-end (in general, not just for each year).

2. List the types of stock The GAP is authorized to issue.

3. Briefly describe the different features of each type of stock.

4. Prepare the journal entry to record the declaration and payment of cash dividends for fiscal year 2016 (assume declaration and payment occurs simultaneously).

5. Compute The Gaps dividend payout ratio for fiscal year 2016.

6. Does The Gap have any potentially dilutive securities outstanding? If so, explain the effect of them on The Gaps FY2016 EPS.

7. The Gap has stock option and stock award plans. How many do they have?

8. Are any of The Gaps potential common shares anti-dilutive? State briefly how you know.

9. What is the general vesting period for the companys stock options?

10. How many stock options were exercised during fiscal year 2016?

11. Assume that a total of 4,000,000 options were granted at the beginning of fiscal year 2012. Each option granted employees the right to purchase one share of common stock at a price of $25 per share. The options have a 4-year service period. The FV of the options were determined to be $28M. Assume all options exercised during fiscal-year 2016 related to these options, and that they were exercised at year-end, 2016. Prepare the journal entries related to the stock options from 2012 to 2016. (If you do not know how many options were exercised in 2016, assume the amount was 500K for partial credit).

Problem #2

Access the 2017 Annual Report for Procter and Gamble online from the companys website. Review the financial statements and the notes to the financial statements.

1. How many shares of common stock are held in treasury at fiscal year-end 2017?

2. From the information provided in the St. of S/E, recreate the journal entry to record the conversion of preferred stock during fiscal year 2017. (not graded)