Student Name: Class: Problem 07-03 Requirement 1: DONNER COMPANY Partial Income Statement For the Month Ended

January 31, 2011 (a) Average Cost Sales revenue* Cost of goods sold** Gross profit Note: See computations below DONNER COMPANY Computations *Sales revenue: Units Cost Revenue (b) FIFO (c) LIFO (d) Specific Identification

**Cost of goods sold: Units Beginning inventory Purchases (net)*** Goods available for sale Ending inventory**** Cost of goods sold

Weighted Average

FIFO

LIFO

Specific Identification

Student Name: Class: Problem 07-03 Requirement 1: ***Purchases: Units January 12 January 26 Totals ****Ending inventory: (a) Weighted-average: Beginning inventory Purchases Totals Units Amount Cost Dollar Amount

Average cost Ending inventory (b) FIFO: Units Cost Total

Ending inventory

(c) LIFO:

Units

Cost

Total

Ending inventory

(d) Specific identification:

Units

Cost

Total

Ending inventory

Student Name: Class: Problem 07-03 Requirement 1: Requirement 2:

Requirement 3:

Requirement 4:

Given Data P07-03: DONNER COMPANY Transactions Inventory, January 1, 2011 Purchase, January 12 Purchase, January 26 Sale Sale Units 500 600 160 (370) (250) $ Amount 2,500 3,600 1,280

Student Name: Class: Problem 07-05 Requirement 1: INVENTORY Comparison Income Statements Prices Rising FIFO LIFO Sales revenue (500 units) Cost of goods sold: Beginning inventory (300 units) Purchases (400 units) Goods available for sale Ending inventory (200 units)* Cost of goods sold (500 units) Gross profit Expenses Pretax income Income tax expense (30%) Net income *Inventory computations: Units (a) (b) (c) (d) FIFO LIFO FIFO LIFO Cost Total Prices Falling FIFO LIFO

Student Name: Class: Problem 07-05 Requirement 2:

Requirement 3:

Requirement 4:

Given Data P07-05: Prices Rising

Situation A Situation B

Prices Falling
Situation C Situation D

Sales revenue Cost of goods sold: Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Gross profit Expenses Pretax income Income tax expense (30%) Net income Data common to all 4 situations: Sales in units Dollar amount of sales Beginning inventory in units Purchases in units Ending inventory in units Operating expenses

FIFO $15,000 3,300 4,800 8,100 2,400 5,700 9,300 4,000 5,300 1,590 $3,710

LIFO $15,000 ? ? ? ? ? ? 4,000 ? ? ?

FIFO $15,000 ? ? ? ? ? ? 4,000 ? ? ?

LIFO $15,000 ? ? ? ? ? ? 4,000 ? ? ?

500 15,000 300 400 200 4,000 Per Unit $ $ Per Unit $ $ 12 11 11 12 Number of Units 300 400 Number of Units 300 400

Data for Situations A and B (Prices Rising) Beginning inventory Purchases

Total 3,300 4,800

Data for Situations C and D (Prices Falling) Beginning inventory Purchases

Total 3,600 4,400

Student Name: Class: Problem 07-06 Requirement 1: HARVEY COMPANY Income Statement (LCM basis) For the Year Ended December 31, 2011 Sales revenue Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Gross profit Operating expenses Pretax income Income tax expense Net income Computation of ending inventory on LCM basis: Replacement Cost (Market) = = = = LCM Valuation

Item A B C D

Quantity X X X X

Original cost = = = =

X X X X

LCM inventory valuation

Requirement 2: Amount of Change (Decrease)

Item Changed Ending inventory Cost of goods sold Gross profit Pretax income Income tax expense Net income

FIFO Cost Basis

LCM Basis

Requirement 3:

Requirement 4:

Given Data P07-06: HARVEY COMPANY Income Statement December 31, 2011 Sales Revenue Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory (FIFO cost) Cost of goods sold Gross profit Operating expenses Pretax income Income tax expense (30%) Net income $ $ 33,000 184,000 217,000 46,500 170,500 109,500 62,000 47,500 14,250 33,250 280,000

HARVEY COMPANY 2011 Ending Inventory Current Acquisition Replacement Cost Unit Cost Unit Total (Market) $3.0 $9,150 $4.0 5.0 7,500 3.5 1.5 10,650 3.5 6.0 19,200 4.0 $46,500

Item A B C D

Quantity 3,050 1,500 7,100 3,200

Student Name: Class: Problem 07-09 Requirement 1: PRUITT COMPANY Income Statement Corrected 2011 Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (30%) Net income 2012 2013 2014

Requirement 2: PRUITT COMPANY Gross Profit Ratio 2011 Before correction After correction 2012 2013 2014

Requirement 3: PRUITT COMPANY Effect of Error on Income Tax Expense 2012 Income tax expense reported Correct income tax expense Income tax expense overstatement (understatement) 2013

Given Data P07-09: PRUITT COMPANY Income Statement - Uncorrected 2011 $ 2,025,000 1,505,000 520,000 490,000 30,000 9,000 $21,000 2012 $ 2,450,000 1,627,000 823,000 513,000 310,000 93,000 $217,000 2013 $ 2,700,000 1,782,000 918,000 538,000 380,000 114,000 $266,000 2014 $ 2,975,000 2,113,000 862,000 542,000 320,000 96,000 $224,000 $ 18,000

Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (30%) Net Income

Overstatement of inventory - Dec. 31, 2012

CP7-3 Comparing Companies within an Industry

Required:
1. Compute the inventory turnover ratio for both companies for the current year. What do you infer from the difference?

2.

Compare the inventory turnover ratio for both companies to the industry average. Are these two companies doing better or worse than the industry average in turning over their inventory?

This workbook is organized as follows: Sheet Name Contents CP7-3 (this worksheet) CP7-3 Problem Requirements and Workbook Layout Industry Ratio Report Industry Ratio Report AEO Balance Sheets American Eagle Outfitters, Inc. Consolidated Balance Sheets AEO Income Statements American Eagle Outfitters, Inc. Consolidated Statements of Operations AEO Stmts of Stockholders' Eq American Eagle Outfitters, Inc. Consolidated Statements of Stockholders' Equity AEO Statements of Cash Flow American Eagle Outfitters, Inc. Consolidated Statements of Cash Flows Urban Balance Sheets Urban Outfitters, Inc. Consolidated Balance Sheets Urban Income Statements Urban Outfitters, Inc. Consolidated Statements of Income Urban Stmts of Stockholders' Eq Urban Outfitters, Inc. Consolidated Statements of Stockholders' Equity Urban Stmts of Cash Flow Urban Outfitters, Inc. Consolidated Statements of Cash Flows

INDUSTRY RATIO REPORT

Retail Family Clothing Stores Liquidity Current Ratio Quick Ratio Activity Inventory Turnover Days to Sell Inventory Receivables Turnover Average Collection Fixed Asset Turnover Total Asset Turnover Accounts Payable Profitability Gross Profit Margin Operating Profit Margin Net Profit Margin Return on Equity Return on Assets Quality of Income Leverage Times Interest Earned Interest Coverage Total Debt/Total Total Assets/Total Dividends Dividend Payout Yield Dividend Other Advertising-toSales Sales Growth Capital Acquisitions Price/Earnings COMPANIES USED IN INDUSTRY ANALYSIS Company Name Abercrombie & Fitch Aeropostale Inc American Eagle Outfitters Ann Taylor Stores bebe stores Inc Chico's FAS Inc Collective Brands Inc Dress Barn Inc. Foot Locker, Inc Gap Inc Guess? Inc J. Crew Group Inc Limited Brands Inc Nordstrom, Inc. Pacific Sunwear of California Inc Ross Stores Inc The Buckle Inc The Men's Warehouse Inc Urban Outfitters Inc Wet Seal Inc.

2.55 1.38

5.92 70.897 days 54.24 15.07 days 5.76 1.90 6.43

38.99% 6.24% 3.77% 13.11% 7.17% 0.07 0.72 16.33 16.39 1.08 1.92

19.61% 2.22%

2.39% 2.39% 1.93 6.81

DUSTRY ANALYSIS Ticker Symbol ANF ARO AEO ANN BEBE CHS PSS DBRN FL GPS GES JCG LTD JWN PSUN ROST BKE MW URBN WTSLA

AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED BALANCE SHEETS

January 31, 2009 ASSETS Current assets: Cash and cash equivalents Short-term investments Merchandise inventory Accounts and note receivable Prepaid expenses and other Deferred income taxes Total current assets Property and equipment, at cost, net of accumulated depreciation and amortization Goodwill Long-term investments Non-current deferred income taxes Other assets, net Total assets $ 473,342 10,511 294,928 41,471 59,660 45,447 925,359 740,240 10,706 251,007 15,001 21,363 1,963,676

(in thousands, except per share amounts)

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Notes payable Accrued compensation and payroll taxes Accrued rent Accrued income and other taxes Unredeemed stored value cards and gift certificates Current portion of deferred lease credits Other liabilities and accrued expenses Total current liabilities Non-current liabilities: Deferred lease credits Non-current accrued income taxes Other non-current liabilities Total non-current liabilities Commitments and contingencies Stockholders equity Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding Common stock, $0.01 par value; 600,000 shared authorized; 249,328 and 248,763 shares share issued; 205,281 and 204,480 shares outstanding , respectively Contributed capital Accumulated other comprehensive (loss) income Retained earnings Treasury stock, 43,248 and 43,596 shares, repectively, at cost Total stockholders' equity Total liabilities and stockholders equity $ $ 152,068 75,000 29,417 64,695 6,259 42,299 13,726 18,299 401,763

88,314 39,898 24,670 152,882 2,485 513,574 (14,389) 1,694,161 (786,800) 1,409,031 1,963,676

February 2, 2008

116,061 503,878 286,485 31,920 35,486 47,004 1,020,834 625,568 11,479 165,810 24,238 19,751 1,867,680

$ $

157,928 49,494 62,161 22,803 54,554 12,953 16,285 376,178

70,355 44,837 35,846 151,038 2,481 493,395 35,485 1,601,784 (792,681) 1,340,464 1,867,680

AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended January 1, February 2, February 3, 2009 2008 2007 $ 2,988,866 $ 3,055,419 $ 2,794,409 1,814,765 1,174,101 740,742 131,219 302,140 17,790 22,889 297,041 117,980 $ 179,061 $ $ 0.87 0.86 205,169 207,582 1,632,281 1,423,138 715,180 109,203 598,755 37,626 636,381 236,362 $ 400,019 $ $ 1.85 1.82 216,119 220,280 1,453,980 1,340,429 665,606 88,033 586,790 42,277 629,067 241,708 $ 387,359 $ $ 1.74 1.70 222,662 228,384

(In thousands, except per share amounts) Net sales Cost of sales, including certain buying, occupancy and warehousi ng Gross profit Selling, general and administrative expenses Depreciation and Operating income Other income, net Other-thantemporary Income before Provision for income Net income Basic income per Diluted income per Weighted average common shares outstanding - basic Weighted average common shares outstanding - diluted

AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended January 1, February 2, 2009 2008 $ 179,061 $ 400,019 (22,795) 751 197 (378) 242 947 -

(In thousands) Net income Other comprehensive (loss) income: Temporary impairment related to ivestment securities, net of tax Reclassification adjustment for OTTI charges realized in net income related to ARS Reclassification adjustment for losses realized in net income due to the sale of available-for-sale securities, net of tax Unrealized (loss) gain on investments, net of tax Reclassification adjustment for gain realized in net income realted to the transfer of investment securities from available-for-sale classification to trading classification, net of tax Foreign currency translation adjustment Reclassification adjustment for foreign currenty loss reasinzed in net income realted to the disposition of National Logistics Services Other comprehensive (loss) income Comprehensive income

(27,649) (49,874) 129,187 $

12,582 13,771 413,790

CP7-3 Home

COME

e Years Ended February 3, 2007 $ 387,359 -

356 (191)

(177) (1,180) 878 (314) 387,045

AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Accumulated Deferred Other Compensation Comprehensive Expense Income (loss) (1,041) $ 1,041 22,028 (314) 21,714 21,714 13,771 35,485 (49,874) (14,389) $

(in thousands, except per share amounts) Balance at January 31, 2006 Stock awards Repurchase of common stock as part of publicly announced programs Repurchase of common stock from employees Cash paid for fractional shares in three-for-two stock split Reissuance of treasury stock Net income Other comprehensive loss, net of tax Cash dividends ($0.28 per share) Balance at February 3, 2007 Adoption of FIN 48 Balance at February 4, 2007 Stock awards Repurchase of common stock as part of publicly announced programs Repurchase of common stock from employees Reissuance of treasury stock Net income Other comprehensive income, net of tax Cash dividends ($0.98 per share) Balance at February 2, 2008 Stock awards Repurchase of common stock from employees Reissuance of treasury stock Net income Other comprehensive loss, net of tax Cash dividends ($0.40 per share) Balance at January 31, 2009 Note 1 $

Shares Outstanding (1) 221,897 4,556 (5,250) (443) (4) 528 221,284 221,284 1,092 (18,750) (415) 1,269 204,480 453 (164) 512 205,281 $ $

Common Stock 2,416 45 2,461 2,461 20 2,481 4 2,485 $

Contributed Capital 369,807 83,615 (113) 109 453,418 453,418 39,977 493,395 20,179 513,574 $

Retained Earnings 978,855 $

Treasury Stock (2)

Stockholders Equity $ 1,155,552 84,701 (146,485) (7,635) (113) 5,768 387,359 (314) (61,521) 1,417,312 (13,304) 1,404,008 39,997 (438,291) (12,310) 14,066 400,019 13,771 (80,796) 1,340,464 20,603 (3,432) 4,603 179,061 (49,874) (82,394) 1,409,031

(216,513) $ (146,485) (7,635) 8,007 (362,626) (362,626) (438,291) (12,310) 20,546 (792,681) (3,432) 9,313 (786,800) $

(2,348) 387,359 (61,521) 1,302,345 (13,304) 1,289,041 (6,480) 400,019 (80,796) 1,601,784 420 (4,710) 179,061 (82,394) 1,694,161 $

600,000 authorized, 249,328 issued and 205,281 outstanding (excluding 799 shares of non-vested restricted stock), $0.01 par value common stock at January 31, 2009; 600,000 authorized, 248,763 issued and 204,480 outstanding (excluding 687 shares of non-ves

Note2

43,248 shares 43,596 shares and 25,699 shares at January 31, 2009, February 2, 2008, and February 3, 2007, respectively. During Fiscal 2008 and Fiscal 2007, 512 shares and 1,269 shares, respectively, were reissued from treasury stock for the issuance of

AMERICAN EAGLE OUTFITTERS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended January 31, February 2, February 3, 2009 2008 2007 $ 179,061 $ 133,141 20,296 24,469 1,121 (693) (1,141) 6,713 22,889 (13,735) (10,094) (24,781) 390 (3,053) (11,392) 18,887 (20,697) (19,188) 123,132 302,193 (265,335) (48,655) 393,559 (1,180) 78,389 (2,177) 75,000 (3,432) 3,799 693 (82,394) (8,511) (14,790) 357,281 116,061 473,342 $ 400,019 $ 110,753 33,670 (8,147) 7,260 (6,156) 1,221 592 (19,074) (5,660) (1,334) (3,242) (15,559) (699) 4,640 (31,416) (2,598) 64,251 464,270 (250,407) (1,772,653) 2,126,891 (1,170) 102,661 (1,912) (438,291) (12,310) 13,183 6,156 (80,796) (513,970) 3,363 56,324 59,737 116,061 $ 387,359 89,698 36,556 (27,572) 25,465 (19,541) 687 183,968 (53,527) 7,448 (4,204) (5,357) 32,345 11,623 7,791 43,482 33,047 361,909 749,268 (225,939) 12,345 (1,353,339) 915,952 (140) (651,121) (3,020) 2,025 (146,485) (7,635) (113) 28,447 19,541 (61,521) (168,761) (178) (70,792) 130,529 59,737

(In thousands) Operating activities: Net income Adjustments to reconcile income to net cash provided by operating activities: Depreciation and amortization Stock-based compensation Provision for deferred income taxes Tax benefit from share-based payments Excess tax benefit from share-based payments Foreign currency transaction (gain) loss Loss on impairment of assets Other-than-temporary impairment charge Proceeds from sale of trading securities Changes in assets and liabilities: Merchandise inventory Accounts and note receivable Prepaid expenses and other Other assets, net Accounts payable Unredeemed gift cards and gift certificates Deferred lease credits Accrued income and other taxes Accrued liabilities Total adjustments Net cash provided by operating activities Investing activities: Capital expenditures Proceeds from sale of assets Purchase of available-for-sale securities Sale of available-for-sale securities Other investing activities Net cash provided by (used for) investing activities Financing activities: Payments on note payable and capital leases Proceeds from issuance of note payable Repurchase of common stock as part of publicly announced programs Repurchase of common stock from employees Cash paid for fractional shares in connection with three-for-two stock split Net proceeds from stock options exercised Excess tax benefit from share-based payments Cash dividends paid Net cash used for financing activities Effect of exchange rates on cash Net (increase) decrease in cash and cash equivalents Cash and cash equivalents - beginning of period Cash and cash equivalents - end of period

URBAN OUTFITTERS, INC. Consolidated Balance Sheets

(in thousands, except share and per share data) January 31, 2009 ASSETS Current Assets: Cash and cash equivalents Marketable securities Accounts receivable, net of allowance for doubtful accounts of $1,229 and $966, respectively Inventories Prepaid expenses and other current assets Deferred taxes Total current assets Property and equipment, net Marketable securities Deferred income taxes and other assets Total Assets $ 316,035 49,948 36,390 169,698 46,412 5,919 624,402 505,407 155,226 43,974 1,329,009 $ 49,912 141,883 14,324 140,377 33,993 4,694 385,183 299,291 64,748 19,983 769,205 2008

LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable Accrued compensation Accrued expenses and other current liabilities Total current liabilities Deferred rent and other liabilities Total Liabilities Commitments and contingencies (see Note 11) Shareholders' equity: Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued Common shares; $.0001 par value, 200,000,000 shares authorized, 167,712,088 and 166,104,615 issued and outstanding respectively Additional paid-in capital Retained earnings Accumulated other comprehensive (loss) income Total Shareholders Equity Total Liabilities and Shareholders' Equity 62,955 11,975 66,220 141,150 134,084 275,234 41,291 12,673 79,544 133,508 74,817 208,325

17 170,166 901,339 (17,747) 1,053,775 1,329,009 $

16 134,146 426,190 528 560,880 769,205

URBAN OUTFITTERS, INC. Consolidated Statements of Income

(in thousands, except share and per share data) Fiscal Year Ended January 31, 2009 2008 2007 1,834,618 $ 1,507,724 $ 1,224,717 1,121,140 713,478 414,043 299,435 11,504 694 (2,143) 309,490 110,126 199,364 $ 1.20 1.17 166,793,062 170,860,605 $ $ 930,952 576,772 351,827 224,945 9,390 575 (515) 234,395 74,164 160,231 $ 0.97 0.94 165,305,207 169,640,585 $ $ 772,796 451,921 287,932 163,989 6,531 353 (715) 170,158 53,952 116,206 0.71 0.69 164,679,786 168,652,005

Net sales Cost of sales, including certain buying, distribution and occupancy costs Gross profit Selling, general and administrative expenses Income from operations Interest income Other income Other expenses Income before income tax expense Income tax expense Net income Net income per common share: Basic Diluted Weighted average common shares outstanding: Basic Diluted

$ $ $

URBAN OUTFITTERS, INC. Consolidated Statements of Shareholders' Equity

(in thousands, except share data) Accumulated Other Unearned Retained Comprehensive Compensation Earnings Income (loss) $ (3,905) $ 426,190 $ 528 $ 116,206 3,614 542,396 160,231 (652) 701,975 199,364 901,339 142 4,284 703

Comprehensive Income Balances as of February 1, 2006 Net Income Foreign currency translation Unrealized losses on marketable securities, net of tax Comprehensive income Share-based compensation Unearned compensation reclass Exercise of stock options Tax effect of share exercises Share Repurchase Balances as of January 31, 2007 Net income Foreign currency translation FIN48 adjustment Unrealized gains on marketable securities, net of tax Comprehensive income Share-based compensation Exercise of stock options Tax effect of share exercises Balances as of January 31, 2008 Net income Foreign currency translation Unrealized losses on marketable securities, net of tax Comprehensive income Share-based compensation Exercise of stock options Tax effect of share exercises Balances as of January 31, 2009 $ 116,206 3,614 142 119,962

Common Shares Number of Par Shares Value 164,831,477 $ 16 1,375,986 (1,220,000) 164,987,463 1 17 -

Additional Paid-in Capital $ 138,050 3,497 (3,905) 6,350 5,394 (20,801) 128,586 -

Total 560,880 116,206 3,614 142 3,497 6,351 5,394 (20,801) 675,283 160,231 703 (652) 2,248 3,277 5,000 7,341 853,431 199,364 (19,866) (5,116) 3,637 8,891 13,434 1,053,775

3,905 -

160,231 703 2,248 163,182

1,117,152 166,104,615 1,607,473 167,712,088

17 17

3,277 5,000 7,341 144,204 3,637 8,891 13,434 170,166

2,248 7,235 (19,866) (5,116) (17,747) $

199,364 (19,866) (5,116) 174,382

URBAN OUTFITTERS, INC. Consolidated Statements of Cash Flows

(in thousands) Fiscal Year Ended January 31, 2009 2008 2007 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Provision for deferred income taxes Tax benefit of stock option exercises Share-based compensation expense Loss on disposition of property and equipment, net Changes in assets and liabilities: Receivables Inventories Prepaid expenses and other assets Accounts payable, accrued expenses and other liabilities Net cash provided by operating activities Cash flows from investing activities: Cash paid for property and equipment Cash paid for marketable securities Sales and maturities of marketable securities Net cash used in investing activities Cash flows from financing activities: Exercise of stock options Excess tax benefit of stock options exercises Share repurchases Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental cash flow information: Cash paid during the year for: Income taxes Non-cash investing activities - Accrued capital expenditures $ 199,364 81,949 (9,351) (13,434) 3,637 61 (10,726) (272) 9,210 (8,868) 251,570 (112,553) (809,039) 864,685 (56,907) 8,891 13,434 22,325 (6,224) 210,764 105,271 316,035 $ $ 160,231 70,017 (2,782) (7,341) 3,277 317 (5,462) (17,430) (22,441) 75,967 254,353 (115,370) (293,633) 220,101 (188,902) 5,000 7,341 12,341 212 78,004 27,267 105,271 $ 116,206 55,713 (4,959) (5,394) 3,497 1,393 (6,371) (13,416) 6,848 33,600 187,117 (212,029) (182,653) 193,274 (201,408) 6,351 5,394 (20,801) (9,056) 702 (22,645) 49,912 27,267

$ $

115,040 6,561

$ $

70,765 6,645

$ $

52,535 14,618