Analysis and Interpretation of Profitability Balance sheets and income statements for Best Buy Co., Inc.

| March 29, 2017

Question

1. Analysis and Interpretation of Profitability (calculate NOPAT, NOA etc)

2. Assessing Financial Statement Effects of Adjustments

Analysis and Interpretation of Profitability
Balance sheets and income statements for Best Buy Co., Inc. follow.
Consolidated Statements of Earnings
For Fiscal Years Ended ($ millions)

February 27,
2010

Revenue

February 28,
2009

March 1,
2008

$ 49,694

$ 40,023

37,534

34,017

30,477

12,160

10,998

9,546

9,873

8,984

7,385

52

78

66

2,235

1,870

2,161

54

35

129

(111)

(94)

(94)

(62)

2,195

1,700

2,228

802

674

815

1

7

(3)

1,394

1,033

1,410

(77)

(30)

(3)

$ 1,317

Cost of goods sold

$ 45,015

$ 1,003

$ 1,407

Restructuring charges – cost of goods sold
Gross Profit
Selling, general and administrative expenses
Restructuring charges
Goodwill and tradename impairment
Operating income
Other income (expense)
Investment income and other
Investment impairment
Interest expense
Earnings before income tax expense and equity in income of
affiliates
Income tax expense
Equity in income of affiliates
Net earnings including noncontrolling interest
Net income attributable to noncontrolling interest
Net income attributable to Best Buy Co., Inc.
Consolidated Balance Sheets
($ millions, except footnotes)

February 27,
2010

February 28, 2009

Assets
Current assets
Cash and cash equivalents

$ 1,826

$ 498

90

11

Receivables

2,020

1,868

Merchandise inventories

5,486

4,753

Other current assets

1,144

1,062

Short-term investments

Consolidated Statements of Earnings
For Fiscal Years Ended ($ millions)
Revenue

February 27,
2010

February 28,
2009

March 1,
2008

$ 49,694

$ 45,015

$ 40,023

Cost of goods sold

37,534

34,017

30,477

Total current assets

10,566

8,192

757

755

Leasehold improvements

2,154

2,013

Fixtures and equipment

4,447

4,060

95

112

7,453

6,940

3,383

2,766

Property and equipment, net

4,070

4,174

Goodwill

2,452

2,203

Tradenames, net

159

173

Customer relationships, net

279

322

Equity and other investments

324

395

452

367

$ 18,302

$ 15,826

$ 5,276

$ 4,997

Unredeemed gift card liabilities

463

479

Accrued compensation and related expenses

544

459

1,681

1,382

Accrued income taxes

316

281

Short-term debt

663

783

35

54

Total current liabilities

8,978

8,435

Long-term liabilities

1,256

1,109

Long-term debt

1,104

1,126

Property and equipment
Land and buildings

Property under capital lease

Less: Accumulated depreciation

Other noncurrent assets
Total assets
Liabilities and equity
Current liabilities
Accounts payable

Accrued liabilities

Current portion of long-term debt

Consolidated Statements of Earnings
For Fiscal Years Ended ($ millions)
Revenue
Cost of goods sold

February 27,
2010

February 28,
2009

March 1,
2008

$ 49,694

$ 45,015

$ 40,023

37,534

34,017

30,477

Equity
Best Buy Co., Inc. Shareholders’ equity
Preferred stock, $1.00 par value

Common stock, $0.10 par value

42

41

441

205

5,797

4,714

40

(317)

6,320

4,643

644

513

6,964

5,156

$ 18,302

$ 15,826

Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Total Best Buy Co., Inc. shareholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity

(a) Compute net operating profit after tax (NOPAT) for 2010. Assume that the combined federal and
statutory rate is: 37.0%. (Hint: Treat income in equity of affiliates as operating. Round your answer to
the nearest whole number.)
2010 NOPAT = Answer

($ millions)
(b) Compute net operating assets (NOA) for 2010 and 2009. (Hint: Treat the Equity and Other
Investments and the Long-Term Liabilities as operating.)
2010 NOA = Answer

($ millions)
2009 NOA = Answer

($ millions)
(c) Compute Best Buy’s RNOA, net operating profit margin (NOPM) and net operating asset turnover
(NOAT) for 2010. (Do not round until final answer. Round two decimal places. Do not use NOPM x
NOAT to calculate RNOA.)
2010 RNOA = Answer

%
2010 NOPM = Answer

%
2010 NOAT = Answer

(d) Compute net nonoperating obligations (NNO) for 2010 and2009.

2010 NNO = Answer

($ millions)
2009 NNO = Answer

($ millions)
(e) Compute return on equity (ROE) for 2010. (Round your answers to two decimal places. Do
not round until your final answer.)
2010 ROE = Answer

%
(f) Infer the nonoperating return component of ROE for 2010. (Use answers from above to
calculate. Round your answer to two decimal places.)
2010 nonoperating return = Answer

%
Check

Compute NOPAT Using Tax Rates from Tax Footnote
The income statement for The TJX Companies, Inc., follows.
THE TJX COMPANIES, INC.
Consolidated Statements of Income
Fiscal Year Ended ($ thousands)
Net sales
Cost of sales, including buying and occupancy costs
Selling, general and administrative expenses
Provision (credit) for computer intrusion related costs
Interest expense (revenue), net
Income from continuing operations before provision for income
taxes
Provision for income taxes
Income from continuing operations
Gain from discontinued operations, net of income taxes
Net income

U.S. federal statutory income tax rate

January 28, 2006
$16,057,935
12,295,016
2,723,960
29,632

1,009,327
318,904
690,423
$ 690,423

35.0%

Effective state income tax rate

3.9%

Impact of foreign operation

0.5%

All other
Worldwide effective income tax rate

-7.8%
31.6%

Compute TJX’s NOPAT for 2006 using its income tax footnote disclosure. (The Federal and State
tax rate for 2006 as reported by TJX’s tax footnote is: 38.9%). Round to the nearest whole number.
2006 NOPAT = $Answer

Assessing Financial Statement Effects of Adjustments
For each of the following separate situations, prepare the necessary accounting adjustments using
the financial statement effects template.

(a) Unrecorded depreciation on equipment is $610.
(b) The Supplies account has an unadjusted balance of $2,990. Supplies still available at the end of
the period total $1,100.
(c) On the date for preparing financial statements, an estimated utilities expense of $390 has been
incurred, but no utility bill has yet been received or paid.
(d) On the first day of the current period, rent for four periods was paid and recorded as a $2,800
debit to Prepaid Rent and a $2,800 credit to Cash.
(e) Nine months ago, The Allstate Corporation sold a one­year policy to a customer and recorded
the receipt of the premium by crediting Unearned Revenue for $624. No accounting adjustments
have been prepared during the nine­month period. Allstate’s annual financial statements are now
being prepared.
(f) At the end of the period, employee wages of $965 have been incurred but not paid or recorded.
(g) At the end of the period, $300 of interest has been earned but not yet received or recorded.

I need help with D and E to show on balance sheet and income statement

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