Refer to the fiscal year 1990 financial statement of Abercrombie & Fitch Co. Note: ‘’the fiscal year 1999’’

Refers to the year that began on February 1, 1998, and January 30, 1999.

Process:

A. Open T- accounts for each balance sheet and income statement line item (i.e., for the permanent accounts: 9 asset t-accounts 9 liability and owners Equity T-accounts; for the temporary accounts: 5 T- accounts). Enter the January 31, 1998, balance sheet amounts as the opening balance for fiscal 1999 and post the following fiscal 1999 transactions (figures in the thousands of dollars):

1. Inventory costing $481,918 was purchased on account during the year.
2. Store supplies costing $1000 were purchased on account during the year.
3. Sales of $815,804 were made of there $15,804 were on account.
4. The cost of merchandise sold was $465,00.
5. The company collected cash of $3,398 from its customers for sales previously recorded as accounts receivable.
6. Cash of $514,114 was used to pay supplies for goods, supplies an property and equipment previously purchased on account.
7. The company collected $23,785 from the limited in satisfaction of amounts owed by the Limited to A&F .
8. Cash of $50,000 was used to repay principals on long term debt.
9. Property and equipment were acquired on account (accounts payable) for $39,987.
10. The company paid $908 for shares of its own common stock. This is known as treasury stock. It is recorded at cost as a debt in the owner’s equity section of the balance sheet.
11. The following represent a single composite journal entry for all remaining transactions during the year. Record the entry in the appropriate accounts:
12. Dr.          others current assets                                                                      400
13. Dr.          general Adin. And store operating expense                          150,652
14. Dr.          Provision for income Taxes(Expense)                                      68,040
15. Dr.          deferred Income Taxes                                                                 6,978
16. Dr.          Other assets                                                                                       631
17. Cr.                          Cash                                                                                                                      151,264
18. Cr.                          Income taxes Payable                                                                                    17,736
19. Cr.                          Other long term liabilities                                                                             3,327
20. Cr.                          Interest Income                                                                                                3,144
21. Cr.                          Accrued Expenses                                                                                           25,054
22. Cr.                          Common stock                                                                                                            6
23. Cr.                          Paid-in Capital                                                                                                   26,170
24.                 TOTAL                                                                                                                                                                                  

                                                                                                                                      226,701               226,701                

Explanation: to record all other activity for fiscal 1999

 

 

 

• Prepared an unadjusted trial balance as January 30, 1999 using the ending balances in the T-accounts obtained in part A.
• Prepare 1999 adjusting journal entries for the fallowing items and post them to the T-accounts prepared
• In part A.
• 12 a.      Abercrombie & Fitch employees counted the company’s merchandise inventory on January 30,1999. The cost of inventory in stock on that day was $43,992.
• 12 b.      Abercrombie & Fitch employees counted the company’s store supplies on January 30, 1999.
• The cost of store supplies on that day was $5,887 (store supplies used are included in store operating expenses).

                12c.        assume that all of the activity in the ‘’other current assets ‘’ account is related to the company’s insurance policies. The unadjusted amount in ‘’other current assets’’ (hint: $1,696) represent the beginning balance for prepaid insurance premiums plus all cash payments for insurance during the year. At January 30, 1999, the amount of insurance that had not expired was $691.

                12 d.      The company recorded $20,946 of depreciation—part of general, administrative, and store operating expenses – on the property and equipment.

                12 e.      Abercrombie and Fitch employee's last payday was January 21^1st    At year-end there was 10 days wages that had not been recorded. This amounted to $3,685 including all related payroll taxes.

• Prepare an adjusted trial balance as of January 30, 1999, using the ending balances in the T-accounts obtained after recording the adjustments listed in part c .
• Prepare the fiscal 1999 income statement.
• Close the temporary T-accounts and provide the fiscal 1999 closing entry.    
• Prepare the January 30, 1999 balance sheet.

  Analysis         

• Calculate the year-over-year percentage change in Net sales for fiscal 1999. Comment on this trend.
• Comment on the level of inventory in 1999 compared to 1998 and 1997. (inventory in 1997 was $34,943 and total assets were $105,761.) what conclusions do you draw from this trend?
• What additional information might an investor in Abercrombie & Fitch seek in order to evaluate the company’s future level of profitability?

 

 

 

 

 

 

ABERCROMBIE & FITCH CO.

CONSOLIDATED BALANCE SHEETS

(thousands)

                                                                                               January 30,1999                January 31,1998

ASSETS

CURRENT ASSETS:                                                                           

Cash and Equivalents                                                      ?                                                              $42,667

Accounts Receivable                                                       ?                                                              1,695

Inventories                                                                         ?                                                              33,927

Store Supplies                                                                   ?                                                              5,592

Receivable from the limited                                         ?                                                              23,785

Other current assets                                                       ?                                                              1,296

                                                                                                 --------------------------        ---------------------------------

TOTAL CURRENT ASSETS                                                               ?                                              108,962

PROPERTY AND EQUIPMENT, NET                                             ?                                              70,517

DEFERRED INCOME TAXES                                                            ?                                              3,759

OTHER ASSETS                                                                                   ?                                        -----------

                                                                                                ----------------------        --------------------------------------

TOTAL ASSETS                                                                    ======?=======                             $183,238

LIABILITIES AND SHAREHOLDERS  EQUITY

CURRENT LIABILITIES:

Accounts payable                                                             ?                                                              $15,968

Accrued Expenses                                                           ?                                                              35,143

Income Taxes Payable                                                    ?                                                              15,851

                                                                                        ---------------------------         -------------------------------------

TOTAL CURRENT LIABILITIES                                        ?                                                        66,962       

LONG-TERM DEBT                                                            ?                                                        50,000

Other LONG TERM LIABILITIES                                    ?                                                        7,501

SHAREHOLDERS’ EQUITY:

       Common stock                                                          ?                                                              511

       Paid in capital                                                            ?                                                              117,972

      Retained Earnings (Deficit)                                    ?                                                              (58,931)

                                                                                ----------------------           ----------------------------------------------

                                                                                                                                                                59,552

Less: Treasury Stock , at Average Cost                     ?                                                                     (777)

                                                                                                -------------------    --------------------------------------------

TOTAL SHAREHOLDERS ‘ EQUITY                                 ?                                                                 58,775                                

TOTAL LIABILITIES AND SHAREHOLDERS ‘ EQUITY                ?                                                  $183,238                             

The accompanying Notes are an integral part of these Consolidated Financial Statements.

ABERCROMBIE & FITCH CO.

CONSOLIDATED STATEMENTS OF INCOME

(Thousands except per share amounts)                                 

                                                                                                1999                                    1998                                     1997

NET SALES                                                                                                                           $521,617                   $335,372

Cost of goods Sold, Occupancy and buying Costs                 ?                                   320,537                           211,606          

GROSS INCOME                                                                                                                201,080                       123,766

                General, Administrative

                And Store Operating Expenses                   ---------? --------                 116,955                         77,773       

          

OPERATING INCOME                                                                      ?                     84,125                          45,993       

             Interest (Income) /expense, net               --------? --------------             3,583                              4,919              

INCOME BEFORE INCOME TAXES                         ------------? -----------              80,542                           41,074

Provision for Income Taxes                                     -------------? -----------              32,220                       16,400          

NET INCOME                                                                                      ?                   $48,322                    $24,674          

 

The accompanying notes are an integral part of these Consolidated Financial Statements.