Target Corporation prepares its financial statements according to U.S. GAAP. Target's financial statements and disclosure notes for the year ended January 30, 2016, are available Connect. This material also is available under the Investor Relations link at the company's website (www.target.com).

Required:

1. Target's Consolidated Statement of Financial Position (its balance sheet) discloses its current assets and current liabilities.

a. What are the four components of Target's current liabilities?

b. Are current assets sufficient to cover current liabilities? What is the current ratio for the year ended January 30, 2016? How does the ratio compare with the prior year?

c. Why might a company want to avoid having its current ratio be too low? Too high?

2. Disclosure Note 2 discusses Target's accounting for gift card sales. Disclosure Note 18 indicates the amount of gift card liability that is recognized in Target's balance sheet.

a. By how much did Target's gift card liability change between January 30, 2016 and January 31, 2015?

b. How would the following affect Target's gift card liability (indicate "increase," "decrease," or "no change" for each):

i. Sale of a gift card

ii. Redemption of a gift card (the holder using it to acquire goods or services)

iii. Increase in breakage estimated for gift cards already sold

3. Disclosure Note 19 discusses Target's accounting for a data breach in 2013, when "an intruder stole certain payment card and other guest information from our network."

a. What is Target's approach for accruing losses for litigation claims associated with the data breach? Is their approach appropriate?

b. Prepare a journal entry to record Target's recognition of new expenses associated with the data breach litigation for the fiscal year ended January 30, 2016.

c. Prepare a journal entry to record Target's reduction of its liability associated with the data breach litigation for the fiscal year ended January 30, 2016.