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ACCT1201 SUMMER 2023 NUSTART ACCOUNTING PROJECT

General Information

This project involves understanding and analyzing the financial statements of Target and its peer Walmart. This is an individual project that should be completed independently by each student. Consult your professor or the TA if you have any questions.

Please answer one question at a time in your report. Your report must be typewritten (word-processed) and 1.5-lines spaced. To ensure consistency, you must use a 12-point font and a 1” margin throughout (left, right, top and bottom). You must include all necessary calculation process/steps whenever applicable and cite any knowledge or information that is not your own.

Submit your final report via “Turnitin” on Canvas. The due date of your project is listed on the course syllabus. You may turn the project in early. Please do not wait until the deadline to submit. Any project not turned in by the deadline will receive a 15% grade reduction. Any project not submitted within 24 hours of the initial deadline will not receive credit.

Case Requirements 

Check out Target’s most recent form-10K (for Fiscal year ended January 28 2023) on sec.gov and Walmart’s most recent form-10K (for Fiscal year ended January 31, 2023). Answer the following questions one at a time.

1. What expenses does Target subtract from Total revenue (net sales) in the computation of Operating Income?

2. Compute Target’s receivables turnover ratio for the most recent year using the “Total revenue” for net sales and the account “Accounts and other receivables.” Round your answer to two decimal places. Briefly explain what characteristic of its business is the main cause Target’s receivables turnover ratio is so high?

3. Estimate the amount of inventory that Target purchased during the most recent year (Hint: Use the Cost of Goods Sold equation and ignore “certain buying, occupancy, and warehousing expenses.”)

4. Compute the inventory turnover ratio for both Target and Walmart. What can you infer from the difference? If the average inventory turnover ratio for the Retail Industry is around 8.63, are these two companies doing better or worse than the industry average in turning over their inventory?

5. What method does Target use to determine the cost of its inventory? FIFO, LIFO, Average Cost or something else? What about Walmart?

6. Does the Walmart U.S. Segment use an inventory valuation method that is different from its International Segment? If so, is there anything special about U.S. GAAP that may have caused Walmart to select a different valuation method to account for its Walmart U.S. inventory?

7. What does Target include in its Property and Equipment? What depreciation method does Target use for its property and equipment? What about Walmart? If Target switches its depreciation method to double-declining balance at the beginning of next year, what impact would it have on next year’s net income?

8. What is the average issue price of Target’s common stock? Please use data from the most recent year to do your calculation.

9. Has Target issued preferred stock? What about Walmart? Briefly explain the differences between common stock and preferred stock.

10. What is the change in Target’s Retained Earnings from Fiscal year ended 1/29/22 to Fiscal year ended 1/28/23? Use data from its most recent form-10K to explain the causes for this change. What does this say about the company’s performance this year? What about Walmart?

11. Does Target use the direct or indirect method to report cash flows from operating activities? In the operating section of the most recent cash flow statement, explain why “Share-based compensation” and “Depreciation and amortization” were added in the reconciliation of net income to net cash provided by operating activities. Explain why in 2021, “Gain on Dermstore sale” was subtracted in the reconciliation of net income to net cash provided by operating activities.

12. Examine Walmart’s investing and financing activities. List Walmart’s three largest uses (or outflow) of cash in the investing and financing category during the most recent year, and briefly explain what these activities mean. Next, list Walmart’s largest source (or inflow) of cash in the investing and financing category and briefly explain what has happened.