Problem VI: Pro-forma Statements (GameStop Corp) 1. Prepare a balance sheet and income statement for GameStop for the year ended January 29, 2022 (which is fiscal year 2021), using the following assumptions. Use Net Sales as your *anchor' and Long-term debt" as your plug. To save time, you may find it helpful to use the reproduction of the 2020 financial statements on the following page a. Net sales are expected to fall by 20% in 2021. b. Cost of sales will be 68% of net sales in 2021. c. GameStop's pre-tax profit margin (defined as income before taxes divided by net sales) will be 5% in 2021. d. Income tax expense is 20% of pre-tax net income if pre-tax net income is positive, and zero otherwise. e. GameStop will have $500 in cash at the end of 2021. f. Accounts receivable at the end of 2021 will amount to 2% of net sales for the year. g. Inventory will be 25% lower at the end of 2021 as it was at the start of the year. h. Property and equipment will make up the same proportion of total assets at the end of 2021 as it does at the start of 2021. i. Fixed asset turnover ratio (defined as net sales divided by average property and equipment) will be 5.0 in 2021. j. GameStop's days in accounts payable (defined as 365 divided by accounts payable turnover, where accounts payable turnover is defined as net sales divided by average accounts payable) will increase by two weeks (14 days) between 2020 and 2021. k. GameStop will not issue or repurchase any shares and will not declare or pay any dividends in 2021. GameStop Corp. "Our sales and profits are driven through both our physical stores and broad e-commerce capabilities. [Our operations consist primarily of retail operations, with the significant majority of our stores and ecommerce properties engaged in the sale of new and pre-owned video game systems, software and accessories (which we refer to as video game products). ... Through all of our channels, we sell various types of digital products, including downloadable content, network points cards, prepaid digital, prepaid subscription cards and digitally downloadable software and also sell collectible products. As of January 30, 2021, we had a total of 4,816 stores ..." - GameStop's 2020 10-K. Answer problems IV and V using the simplified financial statements and selected information from the GameStop 2020 10-K (see below). Before answering the questions, take a few minutes to review this information. Familiarity with the available information will likely save you some time and mistakes. All information needed to complete the exam is included herein. Information obtained elsewhere may or may not be consistent with the information in the exam. Note that all numbers in the statements and problems are in millions of dollars (5,000,000). Treat each question independently and watch the dates in the questions and on the statements. The year 2020 means the year ended January 30, 2021. Cash and cash equivalents Accounts Receivable, net Inventory Prepaid expenses Property and Equipment Total Assets Balance Sheets for: Jan. 30, 2021 Feb. 1, 2020 634 514 105 142 603 860 225 204 906 1.100 2.473 2.820 Change +120 -37 -257 +21 -194 -347 968 1,009 -30 -108 Accounts Payable Long-term Debt Common Stock and Paid-in-Capital Retained Earnings Total Liab, & Stockholders' Equity 998 1.117 15 690 2.820 21 475 2.473 +6 -215 -347 Net Sales Cost of Sales Selling, General and Admin Expenses Income Tax (Benefit) Expense Net Loss Income Statements for the Year Ended: Jan. 30, 2021 Feb. 1. 2020 Change 5090 6466 - 1376 3830 4557 -727 1531 2342 -811 (56) 38 -94 (215) (471) +256 Additional Information 1. During 2020 (2019), GameStop purchased $40 (564) in Property and Equipment. 2. During 2020. GameStop sold Property and Equipment at book value, but had no impairments. 3. Depreciation was $109 in 2020 and $131 in 2019. 4. GameStop repaid $308 in long-term debt during 2020 and does NOT have a stock repurchase plan. Cash and cash equivalents Accounts Receivable, net Inventory Prepaid expenses Property and Equipment Total Assets Balance Sheets for: Jan. 30, 2021 Jan. 29, 2022 634 105 603 225 906 2,473 Accounts Payable Long-term Debt Common Stock and Paid-in-Capital Retained Earnings Total Liab. & Stockholders' Equity 968 1,009 21 475 2,473 Net Sales Cost of Sales Selling, General and Admin Expenses Income Tax (Benefit) Expense Net Loss Income Statements for the Year Ended: Jan. 30, 2021 Jan. 29, 2022 5090 3830 1531 (56) (215)