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    Inventory Turnover for Walmart and Target

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    Question 4: Problem 4-8A (pages 203-204 in the text)

    Marie's Catering makes sandwiches for vending machines. The sandwiches are delivered to the vendor on the same day that they are made. The following events took place during the first year of operations:

    A. On the first day of the year, issued common stock for $20,000 cash investment and a $10,000 investment in equipment. The equipment is expected to last 10years and will be worthless at the end of that time.
    B. Purchased a delivery truck at the beginning of the year at a cost of $14,000 cash. The truck is expected to last five years and will be worthless at the end of that time.
    C. Made and sold $50,000 sandwiches during the first of operations. The cost incurred to make the sandwiches are (1) $800 monthly rent on facility that included utilities and insurance (2)$25,00 of meat, bread, and condiments(all food purchased on account, and $4,000 is still unpaid at year-end even though all of the food has been used), and (3) $35,000 paid in salaries and wages to employees and supervisors.
    D. Paid $12,000 for part-time office staff salaries.
    E. Sold all sandwiches on account for $2.00 each. As of year-end, $25,000is due from the vendors.

    1. How much revenue will Marie's Catering recognize under the cash basis and under the actual basis? (Please respond in Word document)

    2. Explain how accountings apply the revenue recognition principle to Marie's small business. What conditions would allow Marie's to use the cash method to recognize revenue? (Please respond in Word document)

    3. Prepare an Income Statement according to the accrual method. Ignore income taxes. (Please respond in Excel format)

    Question 5: Problem 5-6A (pages 276-277 in the text)

    Problem 5-6A: Inventory Turnover for Walmart and Target

    The following information was summarized from the 2007 annual report of a Wal-Mart Stores, Inc.:

    In millions

    Cost of sales for the year ended January 31:

    2007 $264,152
    2006 $237,649

    Inventory, January 31:

    2007 $ 33,685
    2006 $ 31,910

    The following information was summarized from the 2006 annual report of Target Corporation:

    In millions

    Cost of sales for the year ended:
    February 3, 2007 $39,399
    January 28, 2006 $34,927

    Inventory:
    February 3, 2007 6,254
    January 28, 2006 5,838

    1. Calculate the inventory turnover ratios for Wal-Mart for the year ending January 31, 2007, and Target for the year ending February 3, 2007. (Please use Excel in responding)

    2. Which company appears to be performing better? What are other information should you consider to determine How these companies are performing in this regard? (Please use word document to answer these questions)

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    Solution Summary

    I put your two problems in Excel, each on their own tab. I responded to the queries on the Word documents below the specific question.

    $2.19