Consolidated Statement of Earnings
Fiscal year endedJan. 31, 2015Feb. 1, 2014
Net sales................................................JAN:$16,435 FEB:$16,148
Cost of goods sold and occupancy expenses...................JAN:10,146 FEB:9,855
Gross profit.............................................JAN:.6,289 FEB:6,293
Operating expenses.......................................JAN:4,206 FEB:4,144
Operating income.........................................JAN:2,083 FEB:2,149
Interest expense..........................................JAN:75 FEB:61
Interest income...........................................JAN:(5) FEB:(5)
Income before income taxes ................................JAN:2,013 FEB:2,093
Income taxes ............................................JAN:751 FEB:813
Net earnings.............................................JAN:$1,262 FEB:$1,280
Common-Size and Pro Forma Income Statements
Refer to the income statements for
The Gap, Inc., presented in E5-34.
a. Prepare common-size income statements for fiscal years 2014 (ending January 31, 2015) and 2013 (ending February 1, 2014).
b. Prepare a pro forma income statement for the ?scal year 2015 (ending January 30, 2016), based on the following assumptions:
• Net sales total $15,000 million.
• Cost of goods sold and occupancy expenses are 64% of sales.
• Operating expenses total 26% of sales.
• Interest income and interest expense are unchanged from the 2014 amounts.
• The Gap’s effective tax rate is 39%.
c. Given the Gap’s business strategy, what are the factors that ultimately determine the accuracy of the pro forma statement prepared in b?