Accounting 501 – Fall 2018
Assignment #2
17 marks
Name(s):______________________________________________________
Instructions: Please use the January 31, 2018, 2017, 2016 Walmart Inc. (a United States based
company) financial statements provided to you to answer this assignment. You MAY NOT access the
other portions of Walmart’s financial statements when completing this assignment.
1.
Why does Walmart call part of its revenue on the income statement “Net sales”? (2 marks)
2. On the balance sheet, Receivables, net means which of the following? (1 mark)
a. The receivables are recorded net of depreciation at Jan 31, 2018
b. The receivables are recorded net of any unpaid amounts at Jan 31, 2018
c. The receivables are recorded net of any unpaid amounts that Walmart can’t estimate
at Jan 31, 2018
d. The receivables are recorded net of any amounts that might not be collectible at Jan
31, 2018
e. The receivables are recorded net of any amounts that are deemed uncollectible at Jan
31, 2018
f. All of the above are correct
g. Only b, d and e are correct
h. Only d and e are correct
i. Only a and e are correct
3. Does it make sense to you that most of the numbers on the balance sheet and income statement
are so similar year over year? Why or why not? (1 mark)
4. Walmart has various streams of revenue. Primarily, they have cash based sales at their retail
locations and they also have certain membership fees for warehouse access. These membership
fees are paid upfront for a period of 12 months.
Scenario: A customer comes to Walmart on January 1, 2018 and purchases $80 of merchandise and a
12-month warehouse membership for $60.
a) Assuming an average margin on the merchandise sale, what are the journal entries to record the
sale? (4 marks)
b) Using, the 3 revenue recognition criteria justify the DIFFERENCE in recording revenue under the
merchandise sale and the membership sale. In other words, please only explain the criterion
where these transactions differ with respect to revenue recognition and make a clear conclusion
on the timing of revenue recognition for each stream. (3 marks)
5. Record the two journal entries that would be required for each of the following situations. Assume
all situations are separate. Please make sure you use actual accounts on the Walmart F/S to make
these entries.
a) Walmart sells gift cards on behalf of many retailers. Walmart receives a fee for selling these gift
cards (1% of the gift card value). How would Walmart have recorded the sale of a $100 Best Buy
gift card in the Jan 31, 2018 F/S? (3 marks)
b) Walmart includes its gift card liability for Walmart gift cards in the “Accrued Liabilities” line on
the F/S. As at Jan 31, 2018, Walmart forgot to estimate the percentage of gift cards that would
never be redeemed. They’d like you to show them the journal entry that would need to be
made if $5M of gift cards are never redeemed. (2 marks)
c) Walmart’s inventory on the balance sheet includes $20M of costs to ship the inventory to the
warehouse locations. Is this ok? If not, please make the journal entry to fix the error. (1 mark)