ATC 7-1 Business Applications Case: Understanding Real-World Annual Reports
Required
Obtain Target Corporation’s annual report at http://investors.target.com using the instructions in Appendix B, and use it to answer the following questions:
Anyone who has shopped at Target knows that many of its customers use a credit card to pay for their purchases; there is even a Target-branded credit card. However, Target did not report any accounts receivable or credit card receivables on its January 28, 2017 (2016), balance sheet.
a. Review Target’s Form 10-K and determine where Target is reporting its credit card receivables.
b. How long does it usually take Target to collect its credit card receivables?
c. How much credit card receivables did Target have as of January 28, 2017, and January 30, 2016, respectively?
d. In the “Item 1. Business” section of its Form 10-K, Target discloses that it has a financial interest in the credit card that bears its name. Discuss this relationship.
Hint: It will be easier to answer these questions if you do a word search on Target’s Form 10-K rather than trying to find the answers by reading through the report.
ATC 7-2 Group Assignment: Missing Information
The following selected financial information is available for three companies:
| Company | Expo | White | Zina |
|---|---|---|---|
| Total sales | $125,000 | $210,000 | ? |
| Cash sales | ? | $26,000 | $120,000 |
| Sales on account | $40,000 | ? | $75,000 |
| Accounts receivable, January 1, Year 2 | $6,200 | $42,000 | ? |
| Accounts receivable, December 31, Year 2 | $5,600 | $48,000 | $7,500 |
| Allowance for doubtful accounts, January 1, Year 2 | ? | ? | $405 |
| Allowance for doubtful accounts, December 31, Year 2 | $224 | $1,680 | ? |
| Uncollectible accounts expense, Year 2 | $242 | $1,200 | $395 |
| Uncollectible accounts written off | $204 | $1,360 | $365 |
| Collections of accounts receivable, Year 2 | ? | ? | $75,235 |
Required
a. Divide the class into three sections and divide each section into groups of three to five students. Assign one of the companies to each of the sections.
Group Tasks
- Determine the missing amounts for your company.
- Determine the percentage of accounts receivable estimated to be uncollectible at the end of Year 1 and Year 2 for your company.
- Determine the percentage of total sales that are sales on account for your company.
- Determine the accounts receivable turnover for your company.
Class Discussion
b. Have a representative of each section put the missing information on the board and explain how it was determined.
c. Which company has the highest percentage of sales that are on account?
d. Which company is doing the best job of collecting its accounts receivable? What procedures and policies can a company use to better collect its accounts receivable?
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