In: Accounting
III. Income Taxes
If Congress voted to eliminate corporate taxes, what would be the effect on Target Corporation's income statement and balance sheet? Defend your response.
Calculate the income tax rate for Target Corporation. What effect will an increase in income of $2,000,000 have on Target Corporation?
What are the effects on the balance sheet and income statement? Justify your response.
How much did Target Corporation pay in foreign taxes last year? What percentage of its income is United States vs. foreign?
V. Pensions
Address the following elements in the form of a memo to your
CEO:
From Target Corporation's financial information, what type of pension plan does it have? Discuss the reasons why Target Corporation has chosen this particular plan.
What was the effect of the pension plan on Target Corporation's financial statements? Defend your response.
Your CEO has informed you—the controller of Target Corporation—that the board of directors has made the decision to look at other options of types of retirement plans. Investigate what other alternatives would be available, and determine which would be appropriate for Target Corporation.
Income statements
Period Ending |
1/28/2017 |
1/30/2016 |
|
Total Revenue |
$69,495,000 |
$73,785,000 |
|
Cost of Revenue |
$48,872,000 |
$51,997,000 |
|
Gross Profit |
$20,623,000 |
$21,788,000 |
|
Research and Development |
$0 |
$0 |
|
Sales, General and Admin. |
$13,356,000 |
$14,665,000 |
|
Non-Recurring Items |
$0 |
$0 |
|
Other Operating Items |
$2,298,000 |
$2,213,000 |
|
Operating Income |
$4,969,000 |
$4,910,000 |
|
Additional income/expense items |
$0 |
$620,000 |
|
Earnings Before Interest and Tax |
$4,969,000 |
$5,530,000 |
|
Interest Expense |
$1,004,000 |
$607,000 |
|
Earnings Before Tax |
$3,965,000 |
$4,923,000 |
|
Income Tax |
$1,296,000 |
$1,602,000 |
|
Minority Interest |
$0 |
$0 |
|
Equity Earnings/Loss Unconsolidated Subsidiary |
$0 |
$0 |
|
Net Income-Cont. Operations |
$2,669,000 |
$3,321,000 |
|
Net Income |
$2,737,000 |
$3,363,000 |
|
Net Income Applicable to Common Shareholders |
$2,737,000 |
$3,363,000 |
|
Balance Sheet |
|||
Current Assets |
|||
Cash and Cash Equivalents |
$2,512,000 |
$4,046,000 |
|
Short-Term Investments |
$0 |
$0 |
|
Net Receivables |
$0 |
$0 |
|
Inventory |
$8,309,000 |
$8,601,000 |
|
Other Current Assets |
$1,169,000 |
$1,483,000 |
|
Total Current Assets |
$11,990,000 |
$14,130,000 |
|
Long-Term Assets |
|||
Long-Term Investments |
$0 |
$0 |
|
Fixed Assets |
$24,658,000 |
$25,217,000 |
|
Goodwill |
$0 |
$0 |
|
Intangible Assets |
$0 |
$0 |
|
Other Assets |
$783,000 |
$915,000 |
|
Deferred Asset Charges |
$0 |
$0 |
|
Total Assets |
$37,431,000 |
$40,262,000 |
|
Current Liabilities |
|||
Accounts Payable |
$10,989,000 |
$11,654,000 |
|
Short-Term Debt / Current Portion of Long-Term Debt |
$1,718,000 |
$815,000 |
|
Other Current Liabilities |
$1,000 |
$153,000 |
|
Total Current Liabilities |
$12,708,000 |
$12,622,000 |
|
Long-Term Debt |
$11,031,000 |
$11,945,000 |
|
Other Liabilities |
$1,878,000 |
$1,915,000 |
|
Deferred Liability Charges |
$861,000 |
$823,000 |
|
Misc. Stocks |
$0 |
$0 |
|
Minority Interest |
$0 |
$0 |
|
Total Liabilities |
$26,478,000 |
$27,305,000 |
|
Stock-Holders Equity |
|||
Common Stocks |
$46,000 |
$50,000 |
|
Capital Surplus |
$5,661,000 |
$5,348,000 |
|
Retained Earnings |
$5,884,000 |
$8,188,000 |
|
Treasury Stock |
$0 |
$0 |
|
Other Equity |
($638,000) |
($629,000) |
|
Total Equity |
$10,953,000 |
$12,957,000 |
|
Total Liabilities & Equity |
$37,431,000 |
$40,262,000 |
|
Cash Flow |
|||
Net Income |
$2,737,000 |
$3,363,000 |
|
Cash Flow-Operating Activities |
|||
Depreciation |
$2,298,000 |
$2,213,000 |
|
Net Income Adjustments |
$508,000 |
($812,000) |
|
Changes in Operating Activities |
|||
Accounts Receivable |
$0 |
$0 |
|
Changes in Inventories |
$293,000 |
($316,000) |
|
Other Operating Activities |
$36,000 |
$227,000 |
|
Liabilities |
($543,000) |
$579,000 |
|
Net Cash Flow-Operating |
$5,436,000 |
$5,958,000 |
|
Cash flows-Investing Activities |
|||
Capital Expenditures |
($1,547,000) |
($1,438,000) |
|
Investments |
$28,000 |
$24,000 |
|
Other Investing Activities |
$46,000 |
$1,922,000 |
|
Net Cash Flows-Investing |
($1,473,000) |
$508,000 |
|
Cash Flows-Financing Activities |
|||
Sale and Purchase of Stock |
($3,485,000) |
($3,183,000) |
|
Net Borrowings |
($664,000) |
($85,000) |
|
Other Financing Activities |
$0 |
$0 |
|
Net Cash Flows-Financing |
($5,497,000) |
($4,630,000) |
|
Effect of Exchange Rate |
$0 |
$0 |
|
Net Cash Flow |
($1,534,000) |
$1,836,000 |
|
Financial Ratios |
|||
Liquidity Ratios |
|||
Current Ratio |
94% |
112% |
|
Quick Ratio |
29% |
44% |
|
Cash Ratio |
20% |
32% |
|
Profitability Ratio |
|||
Gross Margin |
30% |
30% |
|
Operating Margin |
7% |
7% |
|
Pre-Tax Margin |
6% |
7% |
|
Profit Margin |
4% |
5% |
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