Real World Case 115

Elements; disclosures; The Gap Inc.

LO17, LO19

Real World Financials

Selected financial statements from a recent annual report of The Gap Inc. follow. Use these statements to answer the following questions.

Required:

1. What amounts did The Gap report for the following items for the fiscal year ended February 1, 2014?

a. Total net revenues

b. Total operating expenses

c. Net income (earnings)

d. Total assets

e. Total stockholders' equity

2. How many shares of common stock did The Gap have issued on February 1, 2014?

3. Why do you think The Gap reports more than one year of data in its financial statements?

THE GAP, INC.

Consolidated Balance Sheet

($ and shares in millions except par value)	February 1,2014	February 2, 2013
Assets
Current assets:
Cash and cash equivalents	$1,510	$1,460
Short-term investments		50
Merchandise inventory	1,928	1,758
Other current assets	992	864
Total current assets	4,430	4,132
Property and equipment, net	2,758	2,619
Other long term assets	661	719
Total assets	$7,849	$7470
Liabilities and Stockholders Equity
Current liabilities: Current maturities of debt $25 $ -
Account payable	$1,242	$1,144
Accrued expenses and other current liabilities	1,142	1,092
Income taxes payable	36	108
Total current liabilities	2,445	2,344
Long-term debt Lease incentives and other long term liabilities	1,369 973 2,342	1,,246 986 2,232
Commitments and contingencies (see Notes 11 and 15)
Stockholders equity:
Common stock $0.05 par value
Authorized 2,300 shares; issued 1,106 for all periods presented; outstanding 463 and 485 shares	55	55
Additional paid in capital	2,899	2,864
Retained earnings	14,218	13,259
Accumulated other comprehensive earnings	135	181
Treasury stock, at cost (518 and 430 shares)	(14,245)	(13,465)
Total stockholders equity	3,062	2,894
Total liabilities and stockholders equity	$7,849	$7,470

The GAP INC.

Consolidated Statements of Income

		For the Fiscal Year ended
($ and shares in millions except per value)	February 1, 2014	February 2,2013	January 28, 2012
Net sales	$16,148	$15,651	$14,549
Cost of goods sold and occupancy expenses	9,855	9,480	9,275
Gross profit	6,293	6,171	5,274
Operating expenses	4,144	4,229	3,836
Operating income	2,149	1,942	1,438
Interest expense (reversal)	61	87	74
Interest income	(5)	(6)	(5)
Income before income taxes	2,093	1,861	1,369
Income taxes	813	726	536
Net income	$1,280	$1,135	$833
Weighted average number of shares basic	461	482	529
Weighted average number of shares-diluted	467	488	533
Earnings per share basic	$2.78	$2.35	$1.57
Earnings per share diluted	$2.74	$2.33	$1.56