Financial Accounting: An Integrated Statements Approach, 2nd Edition

1. Compute the gross profit for each year.


2. Compute the operating income for each year.


3. Compute the gross profit as a percentage of net sales for each year. Round to one decimal
   place.


4. Compute the operating income as a percentage of net sales for each year. Round to one dec-
   imal place.


5. Based upon this analysis, comment on the trends in operating performance for the past
   three years.


6. Based upon this analysis, compare Federated’s operating performance with JCPenney’s per-
   formance shown in this chapter (see Exhibit 13).

Nordstrom, Inc., is a fashion specialty retailer offering a wide selection of high-quality apparel,

shoes, and accessories for women, men, and children in the United States through 150 stores lo-

cated in 27 states. The following operating data (in thousands) were taken from 10K filings with

the Securities and Exchange Commission:

1. Compute gross profit as a percent of net sales for each year. Round to one decimal place.


2. Compute operating income as a percent of net sales for each year. Round to one decimal
   place.


3. Based upon (1) and (2), comment on Nordstrom’s operating performance.

Target Corporationis a general merchandise discount retailer. Target has 1,304 stores located in

47 states. The following operating data (in millions) were taken from 10K filings with the

Securities and Exchange Commission:

1. Compute gross profit as a percent of net sales for each year. Round to one decimal place.


2. Compute operating income as a percent of net sales for each year. Round to one decimal place.


3. Based upon (1) and (2), comment on Target’s operating performance.

258 Chapter 5 Accounting for Merchandise Operations

Case 5-2

Analysis of gross profit and

operating income

Case 5-3

Analysis of gross profit and

operating income

For Year Ending January 31

2004 2003 2002

Net sales $6,491,673 $5,975,076 $5,634,130

Cost of goods sold 4,213,955 3,971,372 3,765,859

Gross profit $2,277,718 $2,003,704 $1,868,271

Selling, general, admin. exp. 1,943,715 1,813,968 1,722,635

Operating income $ 334,003 $ 189,736 $ 145,636

For Year Ending

Jan. 31, 2004 Feb. 1, 2003 Feb. 2, 2002

Net sales $48,163 $43,917 $39,888

Cost of goods sold 31,790 29,260 27,246

Gross profit $16,373 $14,657 $12,642

Operating income $ 3,519 $ 3,264 $ 2,680

For the Years Ended

Jan. 29, 2005 Jan. 31, 2004 Feb. 1, 2003

Net sales $15,630 $15,264 $15,435

Cost of merchandise sold 9,297 9,099 9,255

Operating expenses 4,933 4,824 4,837