CP3-2

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CP3-2

• Group 7Heather BroadwellJimmy HaBrittany
  SpanglerWilliam QuanLinda S. Yin

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Question 1

• What is the companys revenue recognition policy?

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AEs Revenue Recognition Policy

• See page C-26 (appendix) for notes to AEs
  financial statements
• Store Sales
• AE records revenue upon the purchase of
  merchandise by customers.

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AEs Revenue Recognition Policy

• See page C-26 (appendix) for notes to AEs
  financial statements
• Store Sales
• AE records revenue upon the purchase of
  merchandise by customers.
• E-Commerce
• AE records revenue at the time the goods are
  shipped.

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AEs Revenue Recognition Policy

• See page C-26 (appendix) for notes to AEs
  financial statements
• Store Sales
• AE records revenue upon the purchase of
  merchandise by customers.
• E-Commerce
• AE records revenue at the time the goods are
  shipped.
• Gift Cards
• AE does not record revenue on the purchase of
  gift cards. A current liability is recorded
  upon purchase and revenue is recognized when the
  gift card is redeemed for merchandise.

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AEs Revenue Recognition Policy

• See page C-26 (appendix) for notes to AEs
  financial statements
• Store Sales
• AE records revenue upon the purchase of
  merchandise by customers.
• E-Commerce
• AE records revenue at the time the goods are
  shipped.
• Gift Cards
• AE does not record revenue on the purchase of
  gift cards. A current liability is recorded
  upon purchase and revenue is recognized when the
  gift card is redeemed for merchandise.
• Sales to Off-Price Retailers
• These sell-offs are typically sold below cost
  and the proceeds are reflected in the cost of
  sales.

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Question 2

• Assuming that 50MM of cost of sales was due to
  non-inventory purchase expenses (occupancy and
  warehousing costs), how much inventory did the
  company buy during the year?

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AE Inventory

• See page C-12 C-13 (appendix) for AEs balance
  sheet income statement
• (Figures in thousands)
• Inventory
• Bal. _at_ 1/31/04 120,586
• (b) ? (a) ?
• Bal. _at_ 1/29/05 137,991

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AE Inventory

• See page C-12 C-13 (appendix) for AEs balance
  sheet income statement
• (Figures in thousands)
• Inventory
• Bal. _at_ 1/31/04 120,586
• (b) ? (a)
  953,433
• Bal. _at_ 1/29/05 137,991
• (a) Total Cost of Sales (for the year ended
  1/29/05) 1,003,433
• Less Non-Inventory Purchase Expense
  - 50,000
• Cost of Sales
  953,433
• Expense (E, -SE) .953,433
• Inventory (-A) .953,433 (a)
• 
  

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AE Inventory

• See page C-12 C-13 (appendix) for AEs balance
  sheet income statement
• (Figures in thousands)
• Inventory
• Bal. _at_ 1/31/04 120,586
• (b) 970,838 (a) 953,433
• Bal. _at_ 1/29/05 137,991
• (b) 120,586 (b) - 953,433 137,991
• (b) - 832,847
  137,991
• 
  (b) 970,838
• AE purchased 970,838 in inventory.

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Question 3

• Calculate general, administrative and selling
  expenses as a percentage of sales for the years
  ended 1/29/05 and 1/31/04. By what percentage
  did it increase or decrease from fiscal 2003 to
  2004?

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General, Admin. Selling Expenses as a
Percentage of Sales(figures in thousands)

• See page C-13 (Appendix) for AEs Income
  Statement
• For the year-ended 1/29/05
• 446,829 / 1,881,241 23.75

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General, Admin. Selling Expenses as a
Percentage of Sales(figures in thousands)

• See page C-13 (Appendix) for AEs Income
  Statement
• For the year-ended 1/29/05
• 446,829 / 1,881,241 23.75
• For the year-ended 1/31/04
• 356,261 / 1,435,436 24.82

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General, Admin. Selling Expenses as a
Percentage of Sales(figures in thousands)

• See page C-13 (Appendix) for AEs Income
  Statement
• For the year-ended 1/29/05
• 446,829 / 1,881,241 23.75
• For the year-ended 1/31/04
• 356,261 / 1,435,436 24.82
• decrease from fiscal year 2003 to 2004
• (23.75 - 24.82) / 24.82 -4.31

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Question 4

• Compute the companys total asset turnover for
  the year-ended 1/29/05 and explain its meaning.

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AEs Total Asset Turnover(figures in thousands)

• See page C-12 C-13 (appendix) for AEs balance
  sheet and income statement
• Total Asset Turnover Sales Revenue / Average
  Total Assets

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AEs Total Asset Turnover(figures in thousands)

• See page C-12 C-13 (appendix) for AEs balance
  sheet and income statement
• Total Asset Turnover Sales Revenue / Average
  Total Assets
• Sales Revenue (for the year-ended 1/29/05)
  1,881,241
• Total Assets as of 1/31/04 932,414
• Total Assets as of 1/29/05 1,293,659
• Average Total Assets 1,113,036.5

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AEs Total Asset Turnover(figures in thousands)

• See page C-12 C-13 (appendix) for AEs balance
  sheet and income statement
• Total Asset Turnover Sales Revenue / Average
  Total Assets
• Sales Revenue (for the year-ended 1/29/05)
  1,881,241
• Total Assets as of 1/31/04 932,414
• Total Assets as of 1/29/05 1,293,659
• Average Total Assets 1,113,036.5
• AEs Total Asset Turnover for the year-ended
  1/29/05
• 1,881,241 / 1,113,036.5 1.69

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AEs Total Asset Turnover(figures in thousands)

• See page C-12 C-13 (appendix) for AEs balance
  sheet and income statement
• Total Asset Turnover Sales Revenue / Average
  Total Assets
• Sales Revenue (for the year-ended 1/29/05)
  1,881,241
• Total Assets as of 1/31/04 932,414
• Total Assets as of 1/29/05 1,293,659
• Average Total Assets 1,113,036.5
• AEs Total Asset Turnover for the year-ended
  1/29/05
• 1,881,241 / 1,113,036.5 1.69
• The total asset turnover ratio measures the
  sales generated per dollar of assets. The higher
  the ratio, the more efficient the company is at
  managing assets. For fiscal 2004, AE generated
  1.69 in sales revenue for every dollar of
  assets.