Just for Feet

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ACCT 3596: Auditing

Just For FEET, Inc.
Case Analysis: Case 1.2 #1-3, 5
Beka Vinogradov
Seat #1

2011

1 Beka Vinogradov ACCT 3596: Case Analysis

#1. Common-Sized Balance Sheets. Just for FEET, Inc. Balance Sheet Years ending Jan 31st 1997 18.40% 0.00% 3.53% 45.97% 1.50% 69.40% 21.08% 8.05% 1.46% 100.00% 20.22% 11.41% 2.07% 0.30% 0.72% 34.73% 5.48% 40.21% 0.00% 48.76% 11.03% 59.79%

1996 Current Assets: Cash & Equivalents Marketable Securities AFS Accounts Receivable Inventory Other Current Assets Total Current Assets Property & Equipment, net Goodwill, net Other Total Assets Current Liabilities: Short-Term Borrowings Accounts Payable Accrued Expenses Income Taxes Payable Current Maturities of LT Debt Total Current Liabilities LT Debt & Obligations Total Liabilities Shareholders' Equity: Common Stock Paid-In Capital Retained Earnings Total Shareholders' Equity Total Liabilities & SH' Equity 0.00% 50.69% 7.47% 58.15% 36.93% 9.04% 1.74% 35.47% 0.56% 83.75% 14.61% 0.00% 1.64% 100.00% 26.61% 10.35% 1.46% 0.11% 0.56% 39.09% 2.76% 41.85%

1998 1.80% 0.00% 2.74% 58.01% 2.65% 65.20% 23.29% 10.31% 1.19% 100.00% 0.00% 14.55% 3.60% 0.13% 0.96% 19.25% 33.51% 52.75% 0.00% 36.20% 11.04% 47.25%

100.00%

100.00%

100.00%

2 Beka Vinogradov ACCT 3596: Case Analysis

#1. Common-Sized Income Statements. Just for FEET, Inc. Income Statement Years ending Jan 31st 1997 100.00% 58.46% 41.54% 0.23% 29.18% 1.41% 0.25% 3.77% 34.60% 7.17% -0.30% 0.29% 7.15% 2.68% 4.47% 0.00% 4.47%

Net Sales Cost of Sales Gross Profit Other Revenues Operating Expenses: Store Operating Store Opening Costs Amortization of Intangibles General & Administrative Total Operating Expenses Operating Income Interest Expense Interest Income EBIT & ∆ Acct. Principle Provision for Income Taxes Earnings prior to ∆ Acct. Principle Prior Year ∆ Acct. Principle Net Earnings

1996 100.00% 57.54% 42.46% 0.23% 27.04% 4.38% 0.07% 3.07% 34.57% 8.12% -0.32% 1.85% 9.65% 3.43% 6.22% -0.80% 5.43%

1998 100.00% 58.38% 41.62% 0.17% 30.01% 1.76% 0.27% 3.14% 35.18% 6.61% -1.04% 0.02% 5.59% 2.15% 3.44% 0.00% 3.44%

3 Beka Vinogradov ACCT 3596: Case Analysis

#1. Key liquidity, solvency, activity, and profitability ratios (1997, 1998). 1997 $ 172,746 $ 146,914 1.1758308 $ 179,299 $ 146,914 1.2204351 $ 314,743 $ 146,914 2.1423622 1998 $ 82,490 $ 155,706 0.5297805 $ 98,330 $ 155,706 0.6315107 $ 311,167 $ 155,706 1.9984265

Cash Ratio

Quick Ratio

Current Ratio

$ 256,397 $ 6,553 39.12666 365 39.12666 9.3286778 $ 147,526 $ 133,323 1.1065308 365 1.1065308 329.85979

$ 478,638 $ 15,840 30.217045 365 30.217045 12.079275 $ 279,816 $ 206,128 1.3574866 365 1.3574866 268.87926

A/R Turnover

Days to Collect Receivables

Inventory Turnover

Days to Sell Inventory

$ 157,278 $ 218,556 0.7196233 $ 20,825 $ (832) -25.030048

$ 180,268 $ 268,084 0.672431 $ 34,296 $ (1,446) -23.717842

Debt to Equity

Times Interest Earned

4 Beka Vinogradov ACCT 3596: Case Analysis

$ $ 37

13,919 ?

$

21,403 ? EPS

$ 108,871 $ 256,397 0.4246189 $ 20,825 $ 256,397 0.0812217 $ 24,743 $ 375,834 0.0658349 $ 24,743 $ 218,556 0.1132113

$ 198,822 $ 478,638 0.4153912 $ 34,296 $ 478,638 0.0716533 $ 34,220 $ 448,352 0.076324 $ 34,220 $ 268,084 0.1276466

Gross Profit %

Profit Margin

Return on Assets

Return on Common Equity

#1. High-risk financial statement items. Based on the information given in the case and the data calculated (above), there are multiple high-risk financial statement items for the 1998 audit of Just for FEET, specifically regarding account balances and presentations and disclosures. Notably, inventory valuation, which increased from 35.47% of total assets in 1996 to 58.01% in 1998, and the accuracy and allocation of vendor allowances were marked as the highest risk areas. With FEET's use of creative accounting, accuracy and classification of transactions/events must be monitored as well. While the calculation of store...
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