Real World Case 3-7 (Static) Balance sheet and significant accounting policies disclosure; Walmart [LO3-2, 3-3, 3-4, 3-8]
The balance sheet and disclosure of significant accounting
policies taken from the 2017 annual report of Walmart Stores Inc.
appear below. Use this information to answer the following
questions:
WAL-MART STORES, INC. Consolidated Balance Sheets ($ in millions except per share data) |
||||||||
As of January 31, | ||||||||
2017 | 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 6,867 | $ | 8,705 | ||||
Receivables (net) | 5,835 | 5,624 | ||||||
Inventories | 43,046 | 44,469 | ||||||
Prepaid expenses and other | 1,941 | 1,441 | ||||||
Total current assets | 57,689 | 60,239 | ||||||
Property and equipment: | ||||||||
Property and equipment | 179,492 | 176,958 | ||||||
Less accumulated depreciation | (71,782 | ) | (66,787 | ) | ||||
Property and equipment (net) | 107,710 | 110,171 | ||||||
Property under capital leases: | ||||||||
Property under capital lease and financing obligations | 11,637 | 11,096 | ||||||
Less accumulated amortization | (5,169 | ) | (4,751 | ) | ||||
Property under capital leases and financing obligations (net) | 6,468 | 6,345 | ||||||
Goodwill | 17,037 | 16,695 | ||||||
Other assets and deferred charges | 9,921 | 6,131 | ||||||
Total assets | $ | 198,825 | $ | 199,581 | ||||
Liabilities, Redeemable Noncontrolling Interest and Equity | ||||||||
Current liabilities: | ||||||||
Short-term borrowings | $ | 1,099 | 2,708 | |||||
Accounts payable | 41,433 | 38,487 | ||||||
Accrued liabilities | 20,654 | 19,607 | ||||||
Accrued income taxes | 921 | 521 | ||||||
Long-term debt due within one year | 2,256 | 2,745 | ||||||
Capital lease and financing obligations due within one year | 565 | 551 | ||||||
Total current liabilities | 66,928 | 64,619 | ||||||
Long-term debt | 36,015 | 38,214 | ||||||
Long-term capital lease and financing obligations | 6,003 | 5,816 | ||||||
Deferred income taxes and other | 9,344 | 7,321 | ||||||
Commitments and contingencies Equity: | ||||||||
Common stock | 305 | 317 | ||||||
Capital in excess of par value | 2,371 | 1,805 | ||||||
Retained earnings | 89,354 | 90,021 | ||||||
Accumulated other comprehensive income (loss) | $ | (14,232 | ) | (11,597 | ) | |||
Total Walmart shareholders’ equity | 77,798 | 80,546 | ||||||
Nonredeemable noncontrolling interest | 2,737 | 3,065 | ||||||
Total equity | 80,535 | 83,611 | ||||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 198,825 | 199,581 | |||||
Source: Wal-Mart
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
WAL-MART STORES, INC.
1 Summary of Significant Accounting Policies (in
part)
Cash and Cash Equivalents
The Company considers investments with a maturity when purchased of
three months or less to be cash equivalents.
Inventories
The Company values inventories at the lower of cost or market as
determined primarily by the retail inventory method of accounting,
using the last-in, first-out (“LIFO”) method for substantially all
of the Walmart U.S. segment’s inventories. The inventory at the
Walmart International segment is valued primarily by the retail
inventory method of accounting, using the first-in, first-out
(“FIFO”) method. At January 31, 2017 and January 31, 2016, the
Company’s inventories valued at LIFO approximated those inventories
as if they were valued at FIFO.
Revenue Recognition
The Company recognizes sales revenue, net of sales taxes and
estimated sales returns, at the time it sells merchandise to the
customer. Digital retail sales include shipping revenue and are
recorded upon delivery to the customer. Customer purchases of
shopping cards, to be utilized in our stores or on our e-commerce
websites, are not recognized as revenue until the card is redeemed
and the customer purchases merchandise using the shopping card. The
Company recognizes revenue from service transactions at the time
the service is performed. Generally, revenue from services is
classified as a component of net sales in the Company’s
Consolidated Statements of Income.
Source: Wal-Mart
Required:
1. Does Walmart separately report current assets
versus long-term assets, and current liabilities versus long-term
liabilities?
2. What amounts did Walmart report for the
following items for 2017: (Enter your answers in
millions.)
Total assets
Current assets
Current liabilities
Total equity
Retained earnings
Inventory
3. What is Walmart’s largest current asset? What
is its largest current liability?
4. Compute Walmart’s current ratio for 2017.
(Round your answer to 2 decimal places.)
5. Identify the following items from the summary
of significant accounting policies:
Does the company have any securities classified as cash equivalents?
What cost method does the company use for its U.S. inventory?
When does the company recognize revenue from service transactions?
1 | Yes | ||||||
2 | |||||||
a. | Total assets=$ 198825 | ||||||
b. | Current assets=$ 57689 | ||||||
c. | Current liabilities=$ 66928 | ||||||
d. | Total equity=$ 80535 | ||||||
e. | Retained earnings=$ $ 89354 | ||||||
f. | Inventory=$ 43046 | ||||||
3 | largest current asset=Inventories=$ 43046 | ||||||
largest current liability=Accounts payable=$ 41433 | |||||||
4 | Current ratio=Current assets/Current liabilities=57689/66928=0.86 | ||||||
5 | |||||||
a. | The Company considers investments with a maturity when purchased of three months or less to be cash equivalents | ||||||
b. | last-in, first-out (“LIFO”) | ||||||
c. | The Company recognizes revenue from service transactions at the time the service is performed | ||||||
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