Question

In: Advanced Math

Chapter 2 material: Which accounts on Target’s balance sheet are accrual-type accounts? Which accounts on Target’s...

Chapter 2 material:

Which accounts on Target’s balance sheet are accrual-type accounts?

Which accounts on Target’s balance sheet are deferral-type accounts?

Compare Target’s 2015 net earnings (the year ended January 30, 2016) to its 2015 cash provided by operating activities. Which is larger?

First, compare Target’s 2014 net income to its 2015 net income. Next, compare Target’s 2014 cash provided by operating activities to its 2015 cash provided by operating activities. Which changed the most from 2014 to 2015, net earnings or cash provided by operating activities?

Why did Target’s net earnings change so much from 2014 to 2015?

Expert Solution

a) Accrual type accounts: (accrual occurs when revenue or expenses are recognized before cash is received or paid)

i. Credit card receivables

ii. Income taxes payable

iii. Interest payable

iv. Dividends payable

v. Accrued and other current liabilities

b) Deferral type accounts: ( occurs when revenue or expenses are recognized after cash is received or paid)

i. Fixtures and equipment

ii. Computer hardware and software

iii. Construction in progress

iv. Inventories

v. Buildings and improvements

c) 2015 net earnings = $3321

Cash provided by operating activities = $3363

So, The cash provided by operating activities is larger

d)

i) 2014 Net income/earnings = -$1636 (Loss occured in 2014)

2015 net income/earnings = $3363

So, net income increased from -1636 to 3363 i.e. 3363-(-1636)= $4999

ii) 2014 Cash provided by operating activities= $2449

2015 Cash provided by operating activities= $3321

So, Cash provided by operating activities increased from 2449 to 3321 i.e. 3321-2449= $ 872

from i & ii it is clear that net income / earnings changed most from 2014 to 2015.

iii) Target net earnings changed from 2014 to 2015 due to discontinue of operations. in 2014 $4085 discontinued from operations which resulted in loss also. Refer image

Colby Messinger answered 2 years ago

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