Question

Analyzing, Forecasting, and Interpreting Both Income Statement and Balance Sheet
Following are the income statements and balance sheets of Best Buy Co., Inc.

Income Statement, Fiscal Years Ended ($ millions)	Feb. 26, 2011	Feb. 27, 2010
Revenue	$ 50,272	$ 49,694
Cost of goods sold	37,611	37,534
Restructuring charges - cost of goods sold	24	--
Gross profit	12,637	12,160
Selling, general and administrative expenses	10,325	9,873
Restructuring charges	198	52
Goodwill and tradename impairment	--	--
Operating income	2,114	2,235
Other income (expenses)
Investment income and other	51	54
Interest expense	(87)	(94)
Earnings before income tax expense and equity in income of affiliates	2,078	2,195
Income tax expense	714	802
Equity in income of affiliates	2	1
Net earnings including noncontrolling interests	1,366	1,394
Net earnings attributable to noncontrolling interests	(89)	(77)
Net earnings attributable to Best Buy Co., Inc.	$ 1,277	$ 1,317

Balance Sheet ($ millions)	Feb. 26, 2011	Feb. 27, 2010
Assets
Cash and cash equivalents	$ 1,103	$ 1,826
Short-term investments	22	90
Receivables	2,348	2,020
Merchandise inventories	5,897	5,486
Other current assets	1,103	1,144
Total current assets	10,473	10,566
Property and equipment
Land and buildings	766	757
Leasehold improvements	2,318	2,154
Fixtures and equipment	4,701	4,447
Property under capital lease	120	95
Gross property and equipment	7,905	7,453
Less accumulated depreciation	4,082	3,383
Net property and equipment	3,823	4,070
Goodwill	2,454	2,452
Tradenames, Net	133	159
Customer Relationships, Net	203	279
Equity and Other Investments	328	324
Other assets	435	452
Total assets	$ 17,849	$ 18,302
Liabilities and Equity
Accounts payable	$ 4,894	$ 5,276
Unredeemed giftcard liabilities	474	463
Accrued compensation and related expenses	570	544
Accrued liabilities	1,471	1,681
Accrued income taxes	256	316
Short-term debt	557	663
Current portion of long-term debt	441	35
Total current liabilities	8,663	8,978
Long-term liabilities	1,183	1,256
Long-term debt	711	1,104
Contingencies and Commitments (Note 13)
Best Buy Co., Inc. Shareholders' Equity
Preferred stock, $ 1.00 par value: Authorized-400,000     shares; Issued and outstanding-none	--	--
Common stock $0.10 par value: Authorized-1.0 billion     shares; Issued and outstanding-392,590,000     and 418,815,000 shares, respectively	39	42
Additional paid-in capital	18	441
Retained earnings	6,372	5,797
Accumulated other comprehensive income	173	40
Total Best Buy Co., Inc. shareholders' equity	6,602	6,320
Noncontrolling interests	690	644
Total equity	7,292	6,964
Total liabilities and shareholders' equity	$ 17,849	$ 18,302

Forecast Best Buy's fiscal 2012 income statement using the following relations (assume "no change" for accounts not listed).  

Revenue growth	3.0%
Cost of good sold/Revenue	74.8%
Restructuring charges - cost of good sold	$--
Selling, general and administrative expenses/Revenue	20.5%
Restructuring charges	$--
Goodwill and trademark impairment	$--
Investment income and other	$51
Investment impairment	$--
Interest expense	$(87)
Income tax expense/Pretax income	34.4%
Equity in income of affiliates	$2
Net earnings attributable to noncontrolling interests/Net earnings including noncontrolling interests	7.5%

Round all answers to the nearest whole number.

Do not use negative signs with your answers in the income statement.

Income Statement, Fiscal Years Ended ($ millions)	2012 Estimated
Revenue	$Answer
Cost of goods sold	Answer
Restructuring charges - cost of goods sold	Answer
Gross profit	Answer
Selling, general and administrative expenses	Answer
Restructuring charges	Answer
Goodwill and tradename impairment	Answer
Operating income	Answer
Other income/expenses
Investment income and other	Answer
Interest expense	Answer
Earnings before income tax expense and equity in income of affiliates	Answer
Income tax expense	Answer
Equity in income of affiliates	Answer
Net earnings including noncontrolling interests	Answer
Net earnings attributable to noncontrolling interests	Answer
Net earnings attributable to Best Buy Co., Inc.	$Answer

Forecast Best Buy's fiscal 2012 balance sheet using the following relations (assume "no change" for accounts not listed). Assume that all capital expenditures are purchases of property and equipment.

Short-term investments	No change
Receivables/Revenue	4.7%
Merchandise inventories/Revenue	11.7%
Other current assets/Revenue	2.2%
CAPEX (Increase in gross Property and equipment)/Revenue	1.5%
Goodwill	No change
Amortization expense for Tradenames	$25
Amortization expense for Customer relationships	$38
Equity and Other Investments	No change
Other Assets/Revenue	0.9%
Accounts payable/Revenue	9.7%
Unredeemed gift card liabilities/Revenue	0.9%
Accrued compensation and related expenses/Revenue	1.1%
Accrued liabilities/Revenue	2.9%
Accrued income taxes/Revenue	0.5%
Long-term liabilities	No change
Noncontrolling interests	*
Depreciation/Prior year gross PPE	12.0%
Amortization/Prior year intangible asset balance	18.7%
Dividends/Net income	18.6%
Long-term debt payments required in fiscal 2013	$37
*increase by net income attributable to noncontrolling interests and assume no dividends

Round answers to the nearest whole number.

Do not use negative signs with your answers in the balance sheet.

Balance Sheet ($ millions)	2012 Estimated
Assets
Cash and cash equivalents	$Answer
Short-term investments	Answer
Receivables	Answer
Merchandise inventories	Answer
Other current assets	Answer
Total current assets	Answer
Property and equipment
Gross property and equipment	Answer
Less accumulated depreciation	Answer
Net property and equipment	Answer
Goodwill	Answer
Tradenames, Net	Answer
Customer Relationships, Net	Answer
Equity and Other Investments	Answer
Other assets	Answer
Total assets	$Answer
Liabilities and equity
Accounts payable	$Answer
Unredeemed gift card liabilities	Answer
Accrued compensation and related expenses	Answer
Accrued liabilities	Answer
Accrued income taxes	Answer
Short-term debt	Answer
Current portion of long-term debt	Answer
Total current liabilities	Answer
Long-term liabilities	Answer
Long-term debt	Answer
Contingencies and Commitments (Note 13)
Best Buy Co., Inc. Shareholders' Equity
Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none	Answer
Common stock, $0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding - 392,590,000 and 418,815,000 shares, respectively	Answer
Additional paid-in capital	Answer
Retained earnings	Answer
Accumulated other comprehensive income	Answer
Total Best Buy Co., Inc. shareholders' equity	Answer
Noncontrolling interests	Answer
Total equity	Answer
Total liabilities and Equity	$ Answer

Answer 1

Income Statement, Fiscal Years Ended ($ millions)	2012
	Estimated
Revenue	51,780	50272 X (1 + 3%)
Cost of goods sold	38,732	74.8% of Revenue
Restructuring charges - cost of goods sold	-	This is a non-recurring expenses. Assumed that no expense was incurred in 2012
Gross profit	13,049
Selling, general and administrative expenses	10,615	20.5% o Revenue
Restructuring charges	-	This is a non-recurring expenses. Assumed that no expense was incurred in 2012
Goodwill and tradename impairment	-	This is a non-recurring expenses. Assumed that no expense was incurred in 2012
Operating income	2,434
Other income/expenses
Investment income and other	51
Interest expense	-87
Earnings before income tax expense and equity in income of affiliates	2,572
Income tax expense	885	34.4% of Earnings before income tax and equity in income of affiliates
Equity in income of affiliates	2
Net earnings including noncontrolling interests	887
Net earnings attributable to noncontrolling interests	66	7.5% net earnings including non-controlling interest
Net earnings attributable to Best Buy Co., Inc.	820

Balance Sheet	2012
($ millions)	Estimated
Assets
Cash and cash equivalents
Short-term investments	22
Receivables	2,434
Merchandise inventories	6,058
Other current assets	1,139
Total current assets	9,653
Property and equipment	8681.7
Gross property and equipment	8681.7
Less accumulated depreciation	-948.6
Net property and equipment	7733.1
Goodwill	2454
Tradenames, Net	133
Customer Relationships, Net	203
Equity and Other Investments	328
Other assets	466
Total assets	20,970
Liabilities and equity
Accounts payable	5,023
Unredeemed gift card liabilities	466
Accrued compensation and related expenses	570
Accrued liabilities	1,502
Accrued income taxes	259
Short-term debt	4,663
Current portion of long-term debt	37
Total current liabilities	12,519
Long-term liabilities
Long-term debt	1,115
Contingencies and Commitments (Note 13)	0
Best Buy Co., Inc. Shareholders' Equity
Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none	0
Common stock, $0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding	39
Additional paid-in capital	18
		Retained earnings	7,037
		Accumulated other comprehensive income	175
Total Best Buy Co., Inc. shareholders' equity	7,269
Noncontrolling interests	66
Total equity	7,336
Total liabilities and Equity	20,970