1. Concept- Read CVs's note on commitments and contingencies in the Supplement to Chapter 1. What commitments and contingencies does the company have? Why is it important to consider this information when analyzing accounts payable? What two conditions have to be met to record commitments and contingencies as liabilities on the balance sheet?
Comparison Case: payables Analysis
2. Business application- Refer to CVs's financial statements in the Supplement to Chapter 1 and to the following data for Walgreens (amounts in millions):
| |
2011 |
2010 |
2009 |
|
Cost of goods sold
|
$51,692
|
$48,444
|
$45,722
|
|
Accounts payable
|
4,810
|
4,585
|
4,308
|
|
Increase (decrease) in merchandise inventory
|
(592)
|
(307)
|
533
|
Compute the payables turnover and days' payable for CVS and Walgreens in 2010 and 2011. (Round to one decimal place.) In 2009, CVS had accounts payable of $3,560 million, and in 2010, its merchandise inventory decreased by $352. Which company do you think made the most use of financing from creditors during the operating cycle? Did the trend change?
Text book: Principles of Accounting By Belverd Needles, Marian Powers, Susan Crosson.