Question 4

Forecast the Income Statement, Balance Sheet, and Statement Following are fiscal year financial statements of Costco. COSTCO WHOLESALE CORP Consolidated Statements of Income For Year Ended ($ millions) Sep. 1, 2019 Sep. 2, 2018 Net sales $179,221 $166,121 Membership fees 4,022 3,770 Total revenue 183,243 169,891 Merchandise costs 159,463 147,782 Selling, general and administrative 17,993 16,651 Preopening expenses 103 82 Operating income 5,684 5,376 Interest expense (180) (191) Interest income and other, net 214 145 Income before income taxes 5,718 5,330 Provision for income taxes 1,273 1,516 Net income including noncontrolling interests 4,445 3,814 Net income attributable to noncontrolling interests (54) (54) Net income attributable to Costco $4,391 $3,760 COSTCO WHOLESALE CORP Consolidated Balance Sheets In millions, except par value Sep. 1, 2019 Sep. 2, 2018 Current Assets Cash and cash equivalents $10,062 $7,265 Short-term investments 1,272 1.445 Receivables, net 1,842 2.003 Merchandise inventories 13,674 13,248 Other current assets 1,333 385 Total current assets 28,183 24,346 Property and Equipment Land 7,700 7,432 Buildings and improvements 20,563 19,328 Equipment and fixtures 9,361 8,729 Construction in progress 1,526 1,368 Gross property and equipment 39,150 36,857 Less accumulated depreciation and amortization (14,083) (13,240) Net property and equipment 25,067 23,617 Other assets 1,230 1,032 Total assets $54,480 $48,995 Current Liabilities Accounts payable $14,015 $13,484 Accrued salaries and benefits 3,811 3,593 Accrued member rewards 1,416 1,268 Deferred membership fees 2,053 1,949 Current portion of long-term debt 2,039 108 Other current liabilities 4,550 3,509 Total current liabilities 27,884 23,911 Long-term debt, excluding current portion 6.149 7,784 Other liabilities 1,746 1,577 Total liabilities 35,779 33,272 Equity Preferred stock 5.01 par value: 100,000,000 shares authorized Common stock 30.01 par value 900,000,000 shares authorized 5 5 Additional paid in capital 7.700 7,328 Accumulated other comprehensive loss (1.723) (1.439) Total Costco stockholders' equity 18.292 15.358 Noncontrolling interests 409 365 Total equity 18,701 15,723 Total Habilities and equity $54,480 $48,995 * no shares issued and outstanding ** 527,550,000 and 525,826,800 shares issued and outstanding Required Forecast Costco's income statement, balance sheet, and statement of cash flows for the year ended September 1, 2020. Combine all property and e accounts into Net property and equipment Forecasts assumptions Forecast Net sales and Membership fees using their respective historical growth rates (2018 to 2019), Forecast the following as a percentage of Net sales: Merchandise costs Receivables, net Merchandise inventories - Accounts payable Accrued member rewards Forecast income tax as 23% of pretax income Forecast Deferred membership fees as a percentage of Membership fees. Assume no change in the balance of the following Preopening expenses Interest expense Interest income Net income attributable to noncontrolling interest Short-term investments Preferred stock . Common stock Accumulated other comprehensive loss Debt maturing in fiscal 2020 and 2021 is $2,039 million and $1,313 million, respectively, The company anticipates repurchasing $300 million in common stock in fiscal 2020, The 2019 statement of cash flows reports the following: Depreciation expense of $1.790 million Dividends of 51 246 million (to forecast 2020 dividends, use the 2019 dividend payout ratio as a percentage of net income attributable to Costco Debt maturing in fiscal 2020 and 2021 is $2,039 million and $1,313 million, respectively, The company anticipates repurchasing $300 million in common stock in fiscal 2020 The 2019 statement of cash flows reports the following: Depreciation expense of $1,790 million Dividends of $1,246 million (to forecast 2020 dividends, use the 2019 dividend payout ratio as a percentage of net income attributable to costco shareholders) Stock-based compensation (a noncash expense that is included in SG&A expense and is added to Additional paid in capital of 5714 million CAPEX of $3,598 million Forecast all other items as a percentage of total revenues . . OX OX Note: Round historical rates used in calculations to three decimal places. For example, assume that Actual Merchandise inventories divided Actual Net sales equals 0.076297. This factor should be rounded to 7.6% before computing your forecasted amount for Merchandise inventories Note: Round your final answers below to the nearest whole dollar COSTCO WHOLESALE CORP Forecasted Income Statement For the year ended Sep. 01, 2020 S millions Forecast Net sales OX Membership fees Total revenues Expenses Merchandise cost 0 x Selling general and administrative OX Preopening expenses OX Operating income OX Interest expense Interest income and other net OX Income before income taxes OX Provision for income taxes OX Net income including noncontrolling interests OX Net income attributable to noncontrolling OX Net Income attributable to Costco $ OX $ COSTCO WHOLESALE CORP Balance Sheet Sep. 01, 2020 $ millions Forecast $ OX Cash and cash equivalents OX Short-term investments 0 x Receivables, net OX Merchandise inventories OX Other current assets Total current assets OX O X Net property and equipment Other assets OX Total assets $ 0 x Accounts payable Accrued salaries and benefits Ox Accrued member rewards 0 x Deferred memberships fees OX Current portion of long-term debt 0 x Other current liabilities Total current liabilities Long term debt, excluding current portion 0 x Other liabilities 0 x Total liabilities OX Preferred stock 0 Common stock OX Additional paid-in capital 0 x Accumulated other comprehensive loss Retained earnings OX Treasury stock 0 x Total Costco stockholders' equity 0 x Noncontrolling interests 0 x Total equity Total liabilities and equity $ OX OX 0 x COSTCO WHOLESALE CORP Forecasted Statement of Cash Flow For the year ended Sep. 01, 2020 $ millions Forecast Net income including noncontrolling interests $ OX Add: Depreciation OX Add: Stock-based compensation Receivables, net OX Merchandise inventories Other current assets Other assets 0 x Accounts payable Accrued salaries and benefits 0 x Accrued member rewards Deferred membership fees OX Other current liabilities OX Other liabilities Net cash from operating activities Capital Expenditures 0 x Net cash from investing activities OX Dividends Change in current maturities of L-T debt 0 x Change in L-T Debt Stock repurchases 0 x Net cash from financing activities Net change in cash Ox Beginning cash 0 x Ending cash 0x $ Forecast the Income Statement, Balance Sheet, and Statement Following are fiscal year financial statements of Costco. COSTCO WHOLESALE CORP Consolidated Statements of Income For Year Ended ($ millions) Sep. 1, 2019 Sep. 2, 2018 Net sales $179,221 $166,121 Membership fees 4,022 3,770 Total revenue 183,243 169,891 Merchandise costs 159,463 147,782 Selling, general and administrative 17,993 16,651 Preopening expenses 103 82 Operating income 5,684 5,376 Interest expense (180) (191) Interest income and other, net 214 145 Income before income taxes 5,718 5,330 Provision for income taxes 1,273 1,516 Net income including noncontrolling interests 4,445 3,814 Net income attributable to noncontrolling interests (54) (54) Net income attributable to Costco $4,391 $3,760 COSTCO WHOLESALE CORP Consolidated Balance Sheets In millions, except par value Sep. 1, 2019 Sep. 2, 2018 Current Assets Cash and cash equivalents $10,062 $7,265 Short-term investments 1,272 1.445 Receivables, net 1,842 2.003 Merchandise inventories 13,674 13,248 Other current assets 1,333 385 Total current assets 28,183 24,346 Property and Equipment Land 7,700 7,432 Buildings and improvements 20,563 19,328 Equipment and fixtures 9,361 8,729 Construction in progress 1,526 1,368 Gross property and equipment 39,150 36,857 Less accumulated depreciation and amortization (14,083) (13,240) Net property and equipment 25,067 23,617 Other assets 1,230 1,032 Total assets $54,480 $48,995 Current Liabilities Accounts payable $14,015 $13,484 Accrued salaries and benefits 3,811 3,593 Accrued member rewards 1,416 1,268 Deferred membership fees 2,053 1,949 Current portion of long-term debt 2,039 108 Other current liabilities 4,550 3,509 Total current liabilities 27,884 23,911 Long-term debt, excluding current portion 6.149 7,784 Other liabilities 1,746 1,577 Total liabilities 35,779 33,272 Equity Preferred stock 5.01 par value: 100,000,000 shares authorized Common stock 30.01 par value 900,000,000 shares authorized 5 5 Additional paid in capital 7.700 7,328 Accumulated other comprehensive loss (1.723) (1.439) Total Costco stockholders' equity 18.292 15.358 Noncontrolling interests 409 365 Total equity 18,701 15,723 Total Habilities and equity $54,480 $48,995 * no shares issued and outstanding ** 527,550,000 and 525,826,800 shares issued and outstanding Required Forecast Costco's income statement, balance sheet, and statement of cash flows for the year ended September 1, 2020. Combine all property and e accounts into Net property and equipment Forecasts assumptions Forecast Net sales and Membership fees using their respective historical growth rates (2018 to 2019), Forecast the following as a percentage of Net sales: Merchandise costs Receivables, net Merchandise inventories - Accounts payable Accrued member rewards Forecast income tax as 23% of pretax income Forecast Deferred membership fees as a percentage of Membership fees. Assume no change in the balance of the following Preopening expenses Interest expense Interest income Net income attributable to noncontrolling interest Short-term investments Preferred stock . Common stock Accumulated other comprehensive loss Debt maturing in fiscal 2020 and 2021 is $2,039 million and $1,313 million, respectively, The company anticipates repurchasing $300 million in common stock in fiscal 2020, The 2019 statement of cash flows reports the following: Depreciation expense of $1.790 million Dividends of 51 246 million (to forecast 2020 dividends, use the 2019 dividend payout ratio as a percentage of net income attributable to Costco Debt maturing in fiscal 2020 and 2021 is $2,039 million and $1,313 million, respectively, The company anticipates repurchasing $300 million in common stock in fiscal 2020 The 2019 statement of cash flows reports the following: Depreciation expense of $1,790 million Dividends of $1,246 million (to forecast 2020 dividends, use the 2019 dividend payout ratio as a percentage of net income attributable to costco shareholders) Stock-based compensation (a noncash expense that is included in SG&A expense and is added to Additional paid in capital of 5714 million CAPEX of $3,598 million Forecast all other items as a percentage of total revenues . . OX OX Note: Round historical rates used in calculations to three decimal places. For example, assume that Actual Merchandise inventories divided Actual Net sales equals 0.076297. This factor should be rounded to 7.6% before computing your forecasted amount for Merchandise inventories Note: Round your final answers below to the nearest whole dollar COSTCO WHOLESALE CORP Forecasted Income Statement For the year ended Sep. 01, 2020 S millions Forecast Net sales OX Membership fees Total revenues Expenses Merchandise cost 0 x Selling general and administrative OX Preopening expenses OX Operating income OX Interest expense Interest income and other net OX Income before income taxes OX Provision for income taxes OX Net income including noncontrolling interests OX Net income attributable to noncontrolling OX Net Income attributable to Costco $ OX $ COSTCO WHOLESALE CORP Balance Sheet Sep. 01, 2020 $ millions Forecast $ OX Cash and cash equivalents OX Short-term investments 0 x Receivables, net OX Merchandise inventories OX Other current assets Total current assets OX O X Net property and equipment Other assets OX Total assets $ 0 x Accounts payable Accrued salaries and benefits Ox Accrued member rewards 0 x Deferred memberships fees OX Current portion of long-term debt 0 x Other current liabilities Total current liabilities Long term debt, excluding current portion 0 x Other liabilities 0 x Total liabilities OX Preferred stock 0 Common stock OX Additional paid-in capital 0 x Accumulated other comprehensive loss Retained earnings OX Treasury stock 0 x Total Costco stockholders' equity 0 x Noncontrolling interests 0 x Total equity Total liabilities and equity $ OX OX 0 x COSTCO WHOLESALE CORP Forecasted Statement of Cash Flow For the year ended Sep. 01, 2020 $ millions Forecast Net income including noncontrolling interests $ OX Add: Depreciation OX Add: Stock-based compensation Receivables, net OX Merchandise inventories Other current assets Other assets 0 x Accounts payable Accrued salaries and benefits 0 x Accrued member rewards Deferred membership fees OX Other current liabilities OX Other liabilities Net cash from operating activities Capital Expenditures 0 x Net cash from investing activities OX Dividends Change in current maturities of L-T debt 0 x Change in L-T Debt Stock repurchases 0 x Net cash from financing activities Net change in cash Ox Beginning cash 0 x Ending cash 0x $