Preview

Dollar General - Hbs

Powerful Essays
Open Document
Open Document
2268 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Dollar General - Hbs
Dollar General Case

1. Consider the $13.4 million of freight costs. What is the correct (GAAP) method of accounting for these? How did Dollar General in fact originally account for these costs? (Include in your answer a table of the effects on income in any years affected, both before and after tax, of the correct accounting and the accounting they originally used.

The correct GAAP method to account for freight costs is as an expense of Cost of Goods Sold (COGS) that occur at the time services are performed and completed. This is a cost of conducting on-going operations (in-bound supplies, distribution and re-distribution). The freight costs should be expensed as occurred which will be at the time invoice is received and approved for payment. The approval of these invoices concurs that services have been performed.

Dollar General should accrue for these expenses as payables liabilities, of which, they will pay via their cash asset account at the time the payable is due. The payment will be a decrease to cash and subsequent liability.

How in fact did Dollar General handle freight charges?

Dollar General states financial results for the end of January [through and including the 28th]. The freight charges in question occurred on January 28, 2000 and should have been reported in full during this fiscal year [2000].

Dollar General handled (SEC stated) freight charges as follows:

(1) Expense $4M in the next fiscal year [2001] on a monthly basis
(2) $1.3M moved to Dollar General 's Misc. Accrued Liabilities Account
(3) $2.7M to bank clearing account

Total Reduction in COGS (from 1-3 above):

The result of the above handling of freight charges would have reduced the COGS and increased Net Income. The effects of this are as follows:

YE2000
Original NI 219.4
Restated NI 186.7
Effects on the COGS, irregardless of tax, are a straight pass-through and have direct increase on NI.

ILLUSTRATIVE:

YE2000 Original

You May Also Find These Documents Helpful

  • Satisfactory Essays

    PSY 202 Week 1 DQs

    • 732 Words
    • 3 Pages

    Costs. Read Problem 10-21 and discuss the differentiation between product versus general, selling, and administrative costs by setting up financial statements from the transactions in the problem. Respond to at least two of your classmates’ postings…

    • 732 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    ACC 2203 Study Sheet

    • 2272 Words
    • 16 Pages

    Manufacturing Overhead. These product costs are attached to each unit until the units are sold, at…

    • 2272 Words
    • 16 Pages
    Good Essays
  • Powerful Essays

    Case1

    • 6497 Words
    • 26 Pages

    Refer to the Dow Chemical financial statements for 2008 in answering the following: 1. Who are Dow’s external auditors? Describe the two opinion letters that Dow received for 2008. In your own words, explain what these opinions mean. Why are the opinions dated several weeks after Dow’s year end? 2. Use a spreadsheet to construct common-size income statements for 2008 and 2007. (Note: common-size income statements are constructed by dividing each income statement item by net sales). a. Was the company profitable during 2008? During 2007? What does the term “profitable” mean? b. Compute the percentage change in net sales and in net income from 2007 to 2008. c. What are Dow’s major categories of expenses? Do you detect any significant changes in the structure of costs in 2008 compared to 2007? d. Dow shows separate lines on the income statement for goodwill impairment losses, restructuring charges, purchased in-process research and development charges, acquisition-related expenses and asbestos-related credits. Why do you think the company chose not to just include all of the amounts within the line item for “Selling, general and administrative expenses.” e. How would the percentages you computed in part 2b change if the items in part 2d were excluded in measuring net income. (Caution: the items listed in part 2d are shown before tax, while net income is shown after tax. Be sure to adjust your answer accordingly, using the statutory tax rate of 35%.) f. In a single sentence, explain why Dow’s profitability changed from 2007 to 2008. 3. Refer to the statement of cash flows. a. Compare…

    • 6497 Words
    • 26 Pages
    Powerful Essays
  • Good Essays

    quiz 8

    • 662 Words
    • 3 Pages

    4) Company XYZ manufactures a tangible product and sells the product at wholesale. In its first year of operations, XYZ manufactured 1,000 units of product and incurred $200,000 direct material cost and $130,000 direct labor costs. For financial statement purposes, XYZ capitalized $85,000 indirect costs to inventory. For tax purposes, it had to capitalize $116,000 indirect costs to inventory under the unicap rules. At the end of its first year, XYZ held 260 units in inventory. Compute XYZ’s cost of goods…

    • 662 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Acc 290 Week 5 Homework

    • 286 Words
    • 2 Pages

    Numerous amounts of information can be found in an Annual Financial Report. Team A is again utilizing Wal-Mart’s Annual Financial Report to answer the questions for the week five assignment. The questions for week five dig a little deeper into the financial report than the questions for week four. We will analyze the annual financial report and realize the information it has to offer. This paper will address the following subjects-- assets listed in proper order, how the assets are classified, what the cash equivalents are, and the company’s total current liabilities at certain periods. Team A will answer these questions in summary form below and by analyzing the financial report will make us better understand the concepts of reading financial reports. It will also make us more knowledgeable in this area of accounting, being able to read and decipher the financial statements, so that we may apply this knowledge for possible future investment endeavors.…

    • 286 Words
    • 2 Pages
    Good Essays
  • Powerful Essays

    Chapter 03: Financial Accounting Exercise 03-02: Basic Financial Accounting Process Single Company Code Version 1 Rev: 01/03/2011…

    • 3405 Words
    • 14 Pages
    Powerful Essays
  • Good Essays

    Heb Is the Best Store

    • 558 Words
    • 3 Pages

    H-E-B is a popular grocery store in the community of Houston, TX. There are many aspects of H-E-B that appeal to the consumers in my area. Some good qualities of H-E-B are competitive pricing, friendly customer service, cleanliness, and a large variety of products. These positive qualities all come together to provide the consumer with an enjoyable shopping experience.…

    • 558 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    HEB is known to be the best grocery store in Texas. Apart from HEB having in-store samples, (prepared by chefs), there’re other reasons why HEB is a good store. HEB has a produce section, their fruits and vegetables are always fresh and very flawless stacking. HEB also has organic products for a good price, and products that u cannot find anywhere else. For example, HEB has an extensive selection of beer and wine selection for reasonable prices. Also, has snacks and products that are from mast food restaurants, for example, the ketchup, sauces and French fries from Whataburger, this is very good for Whataburger lovers. HEB has great customer…

    • 110 Words
    • 1 Page
    Satisfactory Essays
  • Powerful Essays

    This paper covers the accounting errors related to freight costs that led Overstock.com in 2006 to restate its financial statements for 2002, 2003, 2004 and quarterly reports for 2004 and 2005, and the subsequent SEC investigation in which they were cleared of wrongdoing. It also covers a second restatement from 2009, in which the financial statements for 2009 and 2008 were restated and another SEC investigation related to those restatements. The paper details a glaring problem for Overstock related to its accounting controls and even the company’s admittance in its annual report that it does not have an appropriate number of qualified accounting professionals able to produce financial statements that are free of material errors. Overstock is compared against a direct competitor, Amazon, who although is a much larger company that Overstock, has become the standard in the industry against which all other companies are judged. The financial statements and financial ratios from 2006-2008 of both Amazon and Overstock are shown in comparison with one another to offer some insight into the strengths and weaknesses of each company and to evaluate their performance, and include consolidated statements of operations and consolidated balance sheets from 2005-2008 and common-size statements of operations and balance sheets for each…

    • 9587 Words
    • 39 Pages
    Powerful Essays
  • Good Essays

    Bed Bath and Beyond

    • 866 Words
    • 4 Pages

    Bed Bath & Beyond Inc. is a nationwide chain of 575 retail stores selling domestics merchandise (bed linens, bath items, and kitchen textiles) and home furnishings (kitchen and tabletop items, small appliances, and basic house wares). In 2003 Bed Bath and Beyond reported annual revenues (gross profit) of approximately $1.8 billion, net income of $339 million and net sales of $4.5 billion, representing 22% growth in revenue and 32% growth in income as compared to the previous year. In addition to the 575 Bed Bath and Beyond stores, BBBY also owns 30 Harmon Stores, a discount health, and beauty aid retailer, and 24 Christmas Tree Shops, a retailer of home décor, giftware, and seasonal merchandise. Results of operations for both the Harmon Stores and the Christmas Tree Shops are included in the companies consolidated results of operations and have been since the date of acquisition.…

    • 866 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Dollar General Store

    • 1468 Words
    • 6 Pages

    One of the most successful retailers in America is the small town oriented Dollar General Store. The value and convenience offered by Dollar General Store focuses mostly on low, middle and fixed income families in rural areas that are not normally served by larger retailers. The current programs used by Dollar General Store helps to bring the consumable basics to their customers at a low price.…

    • 1468 Words
    • 6 Pages
    Good Essays
  • Satisfactory Essays

    Wegmans

    • 261 Words
    • 2 Pages

    Douglas Martinez, owner of a plumbing supply company must prepare a cash budget as part of his loan application package. Douglas has a monthly sales forecast and credit collection history to go along with his current cash balance that provides the basis for the preparation of his cash budget.…

    • 261 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    This article will serve as a guideline to work out export transport logistics costs associated with export of containerized shipment.…

    • 3108 Words
    • 13 Pages
    Powerful Essays
  • Good Essays

    If a credit is about to be issued for the recollected goods, this must not exceed the resale price. If transport costs incurred, covered by MTD BIO, the credit should be reduced for the transport costs actually incurred. Furthermore, MTD BIO shall be entitled to deduct a fee for the processing of the order at the rate of 15 % from the value of contract, unless MTD BIO can prove that the costs were actually…

    • 1492 Words
    • 6 Pages
    Good Essays
  • Satisfactory Essays

    Reverse Logistics Costs : Factor - ' Increasing Awareness level of employees about Reverse logistics '.…

    • 976 Words
    • 4 Pages
    Satisfactory Essays