The 10-K is available on the SEC’s EDGAR database, and select “filings” near the top of the page,...

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The 10-K is available on the SEC’s EDGAR database, and select “filings” near the top of the page, then click on “search for company filings”). Then click on “company or fund name, ticker symbol…” Since company names are not always what you might think, it is preferable to input a one-to-four digit “ticker symbol” in the box for “fast search.” Once you get on the screen for a specific company, click on the most recent 10-K and then access “Significant Accounting Policies.” “Notes to the Financial Statements” as well as the statements themselves will also be necessary to complete the assignment.

1. Select three of the following companies: Target, Walmart, JC Penney and Kohl’s. For each company, indicate what methods it uses to value inventory. If it uses different methods for different locations or types of problems, indicate that. If information is given about frequency of physical inventory counts or other information that might be of interest to users, indicate that as well.

2. Go to the financial statements and compute inventory turnover, number of days in inventory, profit margin, return on assets, and return on shareholders’ equity for each of the last three years. Indicate trends for each company. Then compare the three companies’ ratios and indicate possible reasons for differences. Find another retailer (Best Buy, Petco, etc.) that is not a discount or department store but that has inventory and compare its inventory ratios to the three firms you selected in part 1 and explain differences that may exist.

3. For each of the four companies used in part 2, Determine the methods of depreciation of PPE and amortization of limited-life intangibles that exist for each company. Indicate service lives used for PPE and intangible assets and how companies determine them. If a company capitalizes computer hardware or software, indicate the method of depreciation and service lives used. Determine the amount of research and development for each company in the most recent year, if any, and indicate possible reasons for differences across companies. Also, for each company, determine how impairment of PPE, goodwill and various other types of intangibles is determined (how frequently done, what determines if impairment is considered, factors that might lead to impairment, as well as actual calculation of impairment). Was there any impairment in the most recent three fiscal years? Explain.

4. For each of the four companies, determine policies defining cash equivalents. Determine policies for recognizing revenue from gift cards, customer loyalty programs, discounts to customers from using a store credit card and other issues involving revenue recognition from customers. Compare these items across companies.

Aarti J · Accepted Answer

Analysis of Target, Walmart, JC Penny and Best Buy
Introduction
In this paper, we would be analysing the different aspects of accounting aspects of the four major companies which includes Target, Walmart, JC Penny and Best buy.
Inventory valuation
Inventory valuation is an important aspect of the company especially for a merchandising stores like Target, Walmart, JC Penny and Best buy. At target, Inventory is valued under retail inventory accounting method using last in first out and first in first out. Apart from this, the company is also valued at lower of cost or market. Walmart uses lower of cost or market using the LIFO method. Inventory valuation at Sam’s club which is a part of Walmart is valued using weighted average cost or LIFO method. At JC Penny, the inventory is valued at the lower of cost using FIFO method or market which is determined by the Retail inventory method in which the retail values of merchandise groups are converted to a cost basis applying the specific average cost to retail ratio which is related to the merchandising group. 
At target, the company estimates its shrink using the historical losses which is verified by the physical inventory counts. The physical inventory counts of target is supposed to be reliable. At JC Penny, the physical inventory counts for the stores are taken atleast annually and cycle count activities for the distribution centers and the regional warehouse are executed on the daily basis. The inventory records and shrinkage is estimated by the physical inventory counts. 
Ratio Analysis
	Target
	
	
	
	
	2018
	2017
	2016
	Inventory turnover
	5.61
	5.95
	5.91
	Cost of goods sold
	53299
	51125
	49145
	Divide: Inventory
	9497
	8597
	8309
	
	
	
	
	Number of days in inventory
	65.04
	61.38
	61.71
	365 days
	365
	365
	365
	Inventory turnover
	5.61
	5.95
	5.91
	
	
	
	
	Profit margin
	3.90%
	4.01%
	3.87%
	Net Income
	2937
	2914
	2734
	Divide:

The 10-K is available on the SEC’s EDGAR database, and select “filings” near the top of the page, then click on “search for company filings”). Then click on “company or fund name, ticker symbol…”...

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