ACC-01

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Answer the following questions:

· What is the purpose of accounting adjustments?

· Name and define the four types of account adjustments and give an example of each.

1.Formulating Financial Statements from Raw Data Following is selected financial information from Abercrombie & Fitch, for its fiscal year ended February 2, 2008 ($ millions):

Revenue	$ 3,749.8
Cash from operating activities	817.8
Cash, beginning year	82.0
Stockholders' equity	1,618.3
Noncash assets	2,449.6
Cash from financing activities*	(281.6)
Cost of goods sold	1,238.5
Total expenses (other than cost of goods sold)	2,035.6
Cash, ending year	118.0
Total liabilities	949.3
Cash from investing activities	(500.2)

*Cash from financing activities includes the effects of foreign exchange rate fluctuations.

(a) Prepare the income statement, the balance sheet, and the statement of cash flows for Abercrombie & Fitch for the fiscal year ended February 2008. Hint: Enter negative numbers only for answers in the statement of cash flows (if applicable).

Abercrombie & Fitch Income Statement ($ millions) Answer
Revenue	$Answer
Answer	Answer
Gross profit	Answer
Answer	Answer
Net income	$Answer

Abercrombie & Fitch Balance Sheet ($ millions) Answer
Assets	Liabilities
Cash	$Answer	Total liabilities	$Answer
Answer	Answer	Answer	Answer
Total assets	$Answer	Total liabilities and equity	$Answer

Abercrombie & Fitch Statement of Cash Flows ($ millions) Answer
Cash from operating activities	$Answer
Answer	Answer
Cash from financing activities	Answer
Net change in cash	Answer
Answer	Answer
Cash, ending year	$Answer

(b) Using the statements prepared for part a. compute the following ratios (for this part only, use the year-end balance instead of the average for assets and stockholders' equity): (i) Profit margin (Round your answer to two decimal places.) Answer% (ii) Asset turnover (Round your answer to two decimal places.) Answer (iii) Return on assets (Round your answer to two decimal places.) Answer% (iv) Return on equity (Round your answer to one decimal place.) Answer%

2.Comparing Abercrombie & Fitch and TJX Companies Following are selected financial statement data from Abercrombie & Fitch (ANF-upscale clothing retailer) and TJX Companies (TJX-value-priced clothing retailer including TJ Maxx) -- both dated the end of January 2009 or 2008.

($ millions)	Company	Total Assets	Net Income	Sales
2008	TJX Companies Inc.	$6,600
2009	TJX Companies Inc.	6,178	$ 881	$19,000
2008	Abercrombie & Fitch	2,568
2009	Abercrombie & Fitch	2,848	272	3,540

(a) Compute the return on assets for both companies for the year ended January 2009. (Round your answers to one decimal place.) TJX 2009 ROA =Answer% ANF 2009 ROA =Answer% (b) Disaggregate the ROAs for both companies into the profit margin and asset turnover. TJX 2009 Profit Margin =Answer% (Round your answer to one decimal place.) ANF 2009 Profit Margin =Answer% (Round your answer to one decimal place.) TJX 2009 Asset Turnover =Answer(Round your answer to two decimal places.) ANF 2009 Asset Turnover =Answer(Round your answer to two decimal places.) (c) Which of the following is a likely interpretation of the results of your computations for parts a and b?

ANF turns its assets much faster than TJX and this is the primary reason for its higher return on assets.

ANF is realizing a higher return on assets as a result of its lower investment in assets.

ANF's higher profit margin results from premium prices on its clothing. TJX's value-pricing business model relies on higher turnover of clothing with lower margins. TJX's turnover rate is more than twice as much as ANF's, resulting in a ROA for TJX that is higher than ANF's.

ANF's higher return on assets is the result of its greater level of sales.

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