MBA 6620

Fall 2014
Professor Brown
Please refer to the financial statements from the 2010 Annual Report of The Home Depot to answer the
following questions.
1. On what dates did the companys fiscal year end in 2011 and 2010?
January 30
th
2011
January 31
st
2010
2. Why does the annual report refer to fiscal 2010 when the calendar year is 2011? Explain the
relationship between calendar and fiscal year ends.
Home Depots fiscal year (2010) ends at the end of January 2011, so the one month after the calendar
year ends.
3. Use the companys balance sheet to determine the amounts in the accounting equation: A = L + E
40,125=21,236+18,889
4. How much did The Home Depots sales revenue increase or decrease in the year ended January 30,
2011?
2011 66,997 2010 66,176
5. What is the largest expense on the income statement, and how much did it change from the previous
year? -.33% change
2011 15,849 2010 15,902
6. How much did The Home Depot owe for salaries and related expenses at January 30, 2011? Was this
an increase or decrease from the previous year?
1,290, it increased
7. Refer to the Revenues note in the Summary of Significant Accounting Policies that follows The Home
Depots statements of cash flows. How does the company account for customer payments received in
advance of providing services?
When the Company receives payment from customers before the customer has taken possession ofthe
merchandise or the service has been performed, the amount received is recorded as Deferred Revenue
in the accompanying Consolidated Balance Sheets until the sale or service is complete. The Company
also records Deferred Revenue for the sale of gift cards and recognizes this revenue upon the
redemption of gift cards in NetSales. Gift card breakage income is recognized based upon historical
redemption patterns and represents thebalance of gift cards for which the Company believes the
likelihood of redemption by the customer is remote.During fiscal 2010, 2009 and 2008, the Company
recognized $46 million, $40 million and $37 million,respectively, of gift card breakage income. This
income is included in the accompanying Consolidated Statements of Earnings as a reduction in SG&A.
8. What adjusting journal entry must The Home Depot make when it provides services paid by gift card?
Debit Unearned Revenue
Credit Revenue
9. Assume The Home Depot experienced no shrinkage or inventory write downs in the most recent year.
Using the balance sheet and income statement, estimate the amount of inventory purchases in the
2010-2011 year. 10,625 for 2011 10,188 for 2010 Beginning 10,188, 10625 + buy
45,130---Amount of purchased inventory 2010 2011 year
10. How much inventory does the company hold on January 30, 2011? Does this represent an increase
or decrease in comparison to the prior year? An increase, 10625 from 2010.
11. What method(s) does the company use to determine the cost of its inventory? Describe where you
found this information. They used FIFO we found this , under merchandise inventories
12. Where does the company report the amount of its Allowance for Doubtful Accounts? (Hint: The
company refers to its Allowance for Doubtful Accounts as a Valuation Reserve related to
Accounts Receivable.
13. What is the amount of Accumulated Depreciation and Amortization at January 30, 2011? 13,325
What percentage is this of the total cost of property and equipment? 53.17%
14. What amount of Depreciation and Amortization Expense was reported for the year ended January
30, 2011? What percentage of net sales is it? 1616 2.38%
15. As of January 30, 2011, how many shares of common stock were authorized? How many shares were
issued? How many shares were held in treasury?
; authorized: 10 billion shares; issued: 1.722 billion shares a t January 30, 2011 and 1.716 billion shares
at January 31, 2010; outstanding: 1.623 billionshares at January 30, 2011 treasure 99 mil shares in
treasurey stock
16. According to the Retained Earnings column in the Statement of Stockholders Equity, what was the
total dollar amount of cash dividends declared during the year ended January 30, 2011? Is this the same
as the cash amount paid for dividends? How do you know?
1569 declared in 2011, It is the same, because the amount of cash dividends is deducted from net
earnings, soit is the same amount . Because we .945 per share, which equals 1.569 millions, which
means we divided which gave us 1.623 shares outstanding.
17. According to the income statement, how has The Home Depots net earnings and basic earnings per
share changed over the past three years? Increased steadily,

18. Does The Home Depot use the direct method or the indirect method for reporting cash flows from
operations? Direct method, a direct cash flows statement starts with operating activities which home
depot does.
19. What amount of cash tax payments did The Home Depot make during the year ended January 30,
2011? $2,067 billion.
20. In the 2010-2011 fiscal year, The Home Depot generated $4,585 million from operating activities.
Indicate where this cash was spent by listing the two largest cash outflows (from any type of firm
activity). The biggest cash outflows in the operating activities realms was merchandise inventrory and
accounts payable and accrued expenses.