Question

Analyzing, Forecast, and Interpret Income Statement and Balance Sheet
Following are the income statement and balance sheet of Whole Foods Market Inc.

WHOLE FOODS MARKET INC.
Consolidated Statement of Operations
Fiscal Years Ended (in millions)		Sept 25, 2016	Sept 27, 2015
Sales		$15,724	$15,389
Cost of goods sold and occupancy costs		10,313	9,973
Gross profit		5,411	5,416
Selling, general and administrative expenses		4,477	4,472
Pre-opening expenses		64	67
Relocation, store closures and lease termination costs		13	16
Operating income		857	861
Interest expense		(41)	-
Investment and other income		11	17
Income before income taxes		827	878
Provision for income taxes		320	342
Net Income		$507	$536

WHOLE FOODS MARKET INC.
Consolidated Balance Sheet
(In millions)		Sept 25, 2016	Sept 27, 2015
Assets
Current assets
Cash and cash equivalents		$351	$237
Short-term investments-available-for-sale securities		379	155
Restricted cash		122	127
Accounts receivable		242	218
Merchandise inventories		517	500
Prepaid expenses and other current assets		167	108
Deferred income taxes		197	199
Total current assets		1,975	1,544
Property and equipment, net		3,442	3,163
Long-term investments--available-for-sale securities		-	63
Goodwill		710	710
Intangible assets, net		74	79
Deferred income taxes		100	144
Other assets		40	38
Total assets		$6,341	$5,741
Liabilities and shareholders' equity
Current liabilities
Current installments of long-term debt& capital lease obligations		$3	$3
Accounts payable		307	295
Accrued payroll, bonus and other benefits due team members		407	436
Dividends payable		43	45
Other current liabilities		581	473
Total current liabilities		1,341	1,252
Long-term debt& capital lease obligations, less current installments		1,048	62
Deferred lease liabilities		640	587
Other long-term liabilities		88	71
Total liabilities		3,117	1,972
Shareholders' equity
Common stock, no par value, 1,200 shares authorized;377.0 and 377.1 shares issued; 318.3 and 348.9 share outstanding at 2016 and 2015, respectively		2,933	2,904
Common stock in treasury, at cost, 58.7 and 28.2 shares at 2016 and 2015, respectively		(2,026)	(1,124)
Accumulated other comprehensive income loss		(32)	(28)
Retained earnings		2,349	2,017
Total shareholders' equity		3,224	3,769
Total liabilities and shareholders' equity		$6,341	$5,741

(a.) Forecast the 2017 income statement for Whole Foods using the following forecast assumptions, which are expressed as a percentage of sales unless otherwise noted (assume "no change" for accounts not listed). ($ millions)

Sales growth	1%
Cost of good sold and occupancy costs	65.6%
Selling, general and administrative expenses	28.5%
Pre-opening expenses	0.4%
Relocation, store closures and lease termination costs	$0
Interest expense	No change
Investment and other income	No change
Provision for income taxes/Pretax income	37%

• Round all answers to the nearest whole number.

• Do not use negative signs with your answers.

Whole Foods Market, Inc. Forecasted Statement of Operations ($ millions)	2017 Estimated
Sales
Cost of goods sold and occupancy costs
Selling, general and administrative expenses
Pre-opening expenses
Relocation, store closures and lease termination costs
Operating income
Interest expense
Investment and other income
Income before income taxes
Provision for income taxes
Net income

(b.) Forecast the 2017 balance sheet for Whole Foods using the following forecast assumptions ($ in millions).

Accounts receivable/Sales	1.8%
Merchandise inventories/Sales	3.3%
Prepaid expenses and other current assets/Sales	1.1%
Deferred income taxes (current assets)/Sales	1.3%
Deferred income taxes (noncurrent assets)/Sales	0.6%
Accounts payable/Sales	2.0%
Accrued payroll, bonus and other benefits due team members/Sales	2.6%
Other current liabilities/Sales	3.7%
Depreciation expense as a percentage of PPE, net, at start of the year	15.0%
CAPEX and development of new properties (all PPE) as a percentage of Sales	5.0%
Amortization of intangible assets	$6
Dividends payable as a percentage of dividends	25.0%
Long-term debt repayment due in 2017	$3
Long-term debt repayment due in 2018	$65
Increase in treasury stock in 2017	$200
Dividends as percentage of net income	30.0%

Assume no change for goodwill, other assets, deferred lease liabilities, other long-term liabilities, common stock, and AOCL.

• Round answers to the nearest whole number.

• Do not use negative signs with your answers.

Whole Foods Market, Inc. Forecasted Balance Sheet, ($ millions)	2017 Estimated
Current assets
Cash and cash equivalents
Short-term investments
Restricted cash
Accounts receivable
Merchandise inventories
Prepaid expenses
Deferred income taxes
Total current assets
Property and equipment, net
Long-term investments
Goodwill
Intangible assets, net
Deferred income taxes
Other assets
Total assets
Current liabilities
Current installments of long-term debt
Accounts payable
Accrued payroll, bonus and benefits
Dividends payable
Other current liabilities
Total current liabilities
Long-term debt and capital leases
Deferred lease liabilities
Other long-term liabilities
Total liabilities
Shareholders' equity:
Common stock, no par value
Common stock in treasury
Accumulated other comprehensive loss
Retained earnings
Total shareholders' equity
Total liabilities and equity

Answer 1

Whole Foods Market, Inc.
Forecasted Statement of Operations ($ millions)	Note Reff S. No.
	Sales	15881	1
	Cost of goods sold and occupancy costs	10418	2
	Selling, general and administrative expenses	4526	3
	Pre-opening expenses	64	4
	Relocation, store closures and lease termination costs	0	5
	Operating income	873
	Interest expense	-41	No Change
	Investment and other income	11	No Change
	Depreciation and amortisation	-522	6
	Income before income taxes	321
	Provision for income taxes	119	7
	Net income	202
Notes to the Profit and loss statement
S. No.
1	Previous Year sale	1%	15724
	Sales growth	1%	157
	Estimated Sales		15881
			As % of Sales	Amount
2	Cost of goods sold and occupancy costs		1	10418
3	Selling, general and administrative expenses		0	4526
4	Pre-opening expenses		0	64
5	Relocation, store closures and lease termination costs	0	0
6	Dep @ 15% Net Property Plan and Equipment at beginning	3442	516
	Add : - Amortisation Expenses			6
	Total Depreciation and amortisation exp			522
7	Provision for income tax
	Income before tax		321
	Tax % - 37%		119

	Whole Foods Market, Inc.	2017 Estimated
	Forecasted Balance Sheet, ($ millions)	Note Reff S. No.
	Current assets
	Cash and cash equivalents	96	Bal. fgr
	Short-term investments	379	No change
	Restricted cash	94.17519745	Note 1
	Accounts receivable	285.86232	1.8% of Sales
	Merchandise inventories	524.08092	3.3% of Sales
	Prepaid expenses	174.69364	1.1% of Sales
	Deferred income taxes	206.45612	1.3% of Sales
	Total current assets	1760.268197
	Property and equipment, net	3719.762	Note 2
	Long-term investments	0	No change
	Goodwill	710	No change
	Intangible assets, net	68	Opening less $6 amortisation
	Deferred income taxes	95.28744	0.6% of Sales
	Other assets	40	No change
	Total assets	6393.317637
	Current liabilities
	Current installments of long-term debt	3
	Accounts payable	317.6248	2% of Sales
	Accrued payroll, bonus and benefits	412.91224	2.6% of Sale
	Dividends payable	15.17519745	25% OF 61
	Other current liabilities	706.438114	3.7% of Sales plus provision for tax
	Total current liabilities	1455.150351
	Long-term debt and capital leases	1045
	Deferred lease liabilities	640
	Other long-term liabilities	88
	Total liabilities	3228.150351
	Shareholders' equity:
	Common stock, no par value	2,933
	Common stock in treasury	-2,226
	Accumulated other comprehensive loss	-32
	Retained earnings	2,491
	Total shareholders' equity	3,166
	Total liabilities and equity	6,394
	Note 1 Restricted Cash at beginning 122 Add: Divident During the year 30% of Net income 60.70079 Total Balance 182.7008 Less: Divident payable at beginning - at the end + Addition 89 At beginning                        = 43 Less :At the end of year = 15 ('At the rate 25% of Divident i.e. 61X25%) Add: Addition                      = 61 89 Balance available 93.70079 Note 2 Property plan and equipment at beginning 3,442 Addition - 5% of sales 794.062 Less - Depreciation at the rate 15% of balance at beginning 516.3 Closing balance 3,720