Question

Inferring Transactions from Financial Statements
The GAP is a global clothing retailer for men, women, children, and babies. The following information is taken from The Gap's fiscal 2015 annual report.

Selected Balance Sheet Data ($ millions)	2015	2014
Inventories	$1,901	$1,861
Accounts Payable	1,140	1,145

a. The Gap purchased inventories totaling $10,314 million during fiscal 2015. Use the financial statement effects template to record cost of goods sold for The Gap's fiscal year ended 2015. (Assume accounts payable is used only for recording purchases of inventories and all inventories are purchased on credit.)

b. What amount did the company pay to suppliers during the year? Record this with the financial statement effects template.

Use negative signs with answers, if appropriate.

						Balance Sheet								Income Statement
Transaction		Cash Asset	+	Noncash Assets	=	Liabilities	+	Contrib. Capital	+	Earned Capital		Revenues	-	Expenses	=	Net income
a. Recognize cost of goods sold.		Answer		Answer		Answer		Answer		Answer		Answer		Answer		Answer
b. Cash paid to suppliers.		Answer		Answer		Answer		Answer		Answer		Answer		Answer		Answer

Please answer all parts thats say answer

Answer 1

• All working forms part of the answer
• Working for Cost of Goods Sold

Cost of Goods Sold = Beginning Inventories + Purchases – Ending Inventories
= $ 1,861 millions [2014 ending balance] + $ 10,314 million [purchased during 2015] - $ 1,901 milllions [ending balance of 2015]
= 1861 + 10314 – 1901
= $ 10,274 millions = Cost of Goods Sold for 2015

• Working for accounts payables

Cash paid to accounts payable = Beginning balance for 2015 + Purchases – Ending balance for 2015
= $ 1,145 millions + $ 10,314 millions - $ 1,140 millions
= 1145 + 10314 – 1140
= $ 10,319 millions = Cash paid

• Answer, based on above workings

Transaction	Cash Asset	Noncash	Liabilities	Contrib.	Earned	Revenues	Expenses	Net income
		Assets		Capital	Capital
a. Recognize cost of goods sold.	$                                       -	$                             (10,274.00) [decrease in inventory]	$                                           -	$                                         -	$                       (10,274.00) [decrease in Net Income]	$                                       -	$                        10,274.00	$                             (10,274.00)
b. Cash paid to suppliers.	$                      (10,319.00) [decrease in cash]	$                                              -	$                         (10,319.00) [decrease in accounts payable by cash payment]	$                                         -	$                                         -	$                                       -	$                                        -	$                                               -