Management 403: Accounting Aboody

Judson Winton 9/26/12

Wal-Mart Case
This case is due on the first day of class and should be printed. The questions pertain to Wal-Marts (NYSE: WMT) 2011 annual report, which we have attached in the file WMT 2011 Annual Report.pdf. 1) Show that Stockholders Equity equals Assets net of Liabilities for the year ending January 31, 2011. Assets $180,663 Liabilities $109,416 = Equity $71,47

2) Assuming that the name Wal-Mart is valuable, explain why it is not shown as an asset on the companys balance sheet. The value of Wal-Marts name or brand is not shown as an asset on the companys balance sheet because it is an intangible asset that was developed within the company and not acquired in a transaction.

3) Determine the total (current and non-current) amount of Debt and Obligations Under Capital Leases as of January 31, 2011. (NOTE: Short-term borrowings are a form of debt.)

$1,031 (Short-term borrowings) +$4,655 (Long-term debt due within one year) + $330 (Obligations under capital leases due within one year) + $40,692 (Long-term debt) + $3,150 (Long-term obligations under capital leases)= $49,858.

Management 403: Accounting Aboody

Judson Winton 9/26/12

4) Determine the total contributed capital from Wal-Mart shareholders (i.e. ignore noncontrolling interests) as of January 31, 2011. $352 (Common Stock) + $3,577 (Capital in excess of par value) = $3,929

5) Show that the balance of Common Stock on the companys balance sheet corresponds to the par value per share times the number of shares issued and outstanding as of January 31, 2011. (NOTE: There is a rounding difference between the figure you compute and the dollar amount reported on WMTs balance sheet)

Par value per share $0.10

Shares outstanding 3,516

= =

Common stock 351.6

6) Calculate the gross margin for the fiscal year ending January 31, 2011 (Net Sales less Cost of Goods Sold) in percentage-of-sales terms. (NOTE: Do not include Membership and other income.1)

Gross Margin in percentage-of-sales terms=

$418, 952 - $315, 287 = 0.247= 24.7% $418, 952

While there are no black-and-white rules about whether to include this sort of line item, a gross margin measure typically uses the primary sales total and cost of sales typically only pertains only to the product sales included in the Net sales line. This is indeed the case as indicated by the financial statement note describing WMTs cost of sales.

Management 403: Accounting Aboody

Judson Winton 9/26/12

7) Estimate the interest rates on the companys Debt and Capital Leases from information on the 2011 income statement and the 2011 and 2010 balance sheets. Interest Rate on Debt=

$1, 928 = 5.2% ($40, 692 + $33, 231) / 2

Interest Rate on Capital Leases=

$277 $277 = 8.8% ($3,150 + $3,170) / 2 ($3,150 + $3,170) / 2

8) Indicate whether sufficient cash is provided by the companys operating activities for the fiscal year ending January 31, 2011 to cover cash used for investment.

Walmarts operating activities do provide sufficient cash to cover the cash used for investment for the fiscal year ending January 31, 2011. Operating activities provided the company with $23,643,000,000, while it used only $12,193,000,000 in investment activities.

Management 403: Accounting Aboody

Judson Winton 9/26/12

9) Indicate whether the auditors opinion is qualified or unqualified (p. 54). At the end of its report the auditor states, our report date March 30, 2011 expressed an unqualified opinion. Thus, the auditors opinion is unqualified.

10) From managements discussion and analysis (MD&A), identify which segment, WalMart, Sams Club, or International, had the highest net sales growth during 2011 (p. 17) Walmart International had the highest net sales growth during 2011, growing to $109.2 million in sales in 2011 from $97.4 million in sales in 2010, a 12.1% increase.

11) Also from MD&A, determine the new quarterly dividend per share to be paid in fiscal 2012 (p. 24). The new quarterly dividend per share to be in fiscal 2012 is $0.365 ($1.46/4).

12) From the notes to the financial statements, identify when Wal-Marts income statement shows revenue from merchandise sales and when it shows revenue from gift cards (referred to as shopping cards in the note) (Revenue Recognition note, p. 35). a. Merchandise sales: Walmarts income statement shows revenue from merchandise sales at the time it sells merchandise to the customer.

b. Gift cards: Walmarts income statement does not show revenue from gift cards until the gift card is redeemed and the customer uses the gift card to purchase merchandise.

13) Also from the notes, determine membership fees received in 2011 from Sams Club memberships (p. 36). 4

Management 403: Accounting Aboody

Judson Winton 9/26/12

$1,074 in membership fees was received in 2011 from Sams Club memberships, $1,064 of which was recognized.