(Solved by Humans)-Problem 5-8 Gap Inc.’s Sales, Cost of Goods Sold, and Gross Profit The consolidated balance...

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Problem 5-8 Gap Inc.’s Sales, Cost of Goods Sold, and Gross Profit The consolidated balance sheets of Gap Inc. included merchandise inventory in the amount of $1,615,000,000 as of January 28, 2012 (the end of fiscal year 2011) and $1,620,000,000 as of January 29, 2011 (the end of fiscal year 2010). Net sales were $14,549,000,000 and $14,664,000,000 at the end of fiscal years 2011 and 2010, respectively. Cost of goods sold and occupancy expenses were $9,275,000,000 and $8,775,000,000 at the end of fiscal years 2011 and 2010, respectively. All amounts are from Gap Inc.’s 2011 Form 10-K. Required 1.        Unlike most other merchandisers, Gap Inc. doesn’t include accounts receivable on its bal- ance sheet. Why doesn’t Gap Inc.’s balance sheet include this account? 2.        Prepare the appropriate journal entry to record sales during the year ended January 28, 2012.         3.        Gap Inc. sets forth net sales but not gross sales on its income statement. What type(s) of deduction(s) would be made from gross sales to arrive at the amount of net sales reported? Why might the company decide not to report the amount(s) of the deduction(s) separately? 4.        Reconstruct the Cost of Goods Sold section of Gap Inc.’s 2011 income statement. 5.        Calculate the gross profit ratios for Gap Inc. for 2011 and 2010 and comment on any change noted. Is the company’s performance improving? Explain. What factors might have caused the change in the gross profit ratio?