Problem #2 American Eagle

Required: Access the American Eagle 2017 Annual Report/10K (In the appendix to the textbook or obtain online)

In Assignment #1, (I added it below) we assumed American Eagle (EA) sold goods costing $1,100 to Bloomingdales on account for $1,600 during fiscal year 2017 and prepared the (complete) journal entry to record this transaction:

Accounts Receivable $1,600

Cost of Goods Sold 1,100

Inventory $1,100

Sales 1,600

1. Assuming the transaction in was NOT recorded, what is the proper fiscal year 2017 amount that should be shown for:

(a) Total net revenue?

(b) Inventory?

2. What is the net book value (carrying value) of AEs property, plant, and equipment (PPE) at fiscal year-end 2017?

3. Determine cash collected from customers during fiscal year 2017.

Assignment 1 (with solution)

Problem #2

American Eagle

Required: Read the American Eagle 2017 Annual Report/10K (in the appendix of the text or online). Look at the financial statements and Notes to the financial statements closely and attempt to infer what kinds of information they report. Then, answer the following questions based on the Report.

On what day of the year does their fiscal year end (their policy in general, not just for one year)? Note 1: the Saturday nearest to January 31 (Note: Fiscal year 2017 ends February 3, 2018)

2. For how many years do they present complete:

a. Balance Sheets 2 years

b. Income Statements 3 years

c. Cash Flow Statements 3 years

3. Are their financial statements audited by independent CPAs? Yes How do you know? Publicly-traded companies must be audited by independent CPAs. The Report of Independent Auditors (Report of Independent Registered Public Accounting Firm since SOX) is included in the Annual Report.

4. Did their total assets increase or decrease over the last year? increase

5. What was the ending balance of inventories? $398,213

6. Write out their basic accounting equation in dollars at year-end.

$1,816,313 = $569,522 + $1,246,791

7. Use the amounts in the financial statements to write out the retained earnings equation for the 2017 fiscal year (include effects of treasury reissue).

End R/E = Beg R/E + NI - Dividends - treasury reissue

1,883,592 = 1,775,775 + 204,163 - 90,858 - 5,488

8. (a) From the Balance Sheet, compute the change in Cash from fiscal year-end 2016 to 2017.

$413,613 - $378,613 = $35,000 increase.

(b) How much of the change is due to:

i) Cash Flows from Operating Activities? $394,426

ii) Cash Flows from Investing Activities? ($172,150)

iii) Cash Flows from Financing Activities? ($188,772)

American Eagle (EA) sold goods costing $1,100 to Bloomingdales on account for $1,600 during fiscal year 2018. Prepare the (complete) journal entry to record this transaction.

Accounts Receivable $1,600

Cost of Goods Sold 1,100

Inventory $1,100

Sales 1,600

Show (in detail) the effect of the transaction in (1) on the balance sheet equation (if more than one account affects a category, show the effect of each account and the total effect on that category)

A = L + S/E

$1,600 (A/R) $1,600 (Sales)

$1,100 (Inventory) $1,100 (CGS)

Net effect: $500 Net effect: $500