Page |1

DeVry University

Acct 305- Intermediate Accounting II

Financial Statement Analysis

Professor Stacy Conrad

August 22, 2021

 Page |2

Table of Contents

Introduction………………………………………………………………………..Page 3

Property, Plant & Equipment……………………………………………………...Page 4

Footnote Disclosure……………………………………………………………….Page 4-5

Intangible Assets…………………………………………………………………..Page 5

Good Will………………………………………………………………………….Page 5

Depreciation Methods……………………………………………………………..Page 5-6

Impairment…………………………………………………………………………Page 6

Current Liabilities………………………………………………………………….Page 6-7

Long-Term Liabilities………………………………………………………………Page 7-8

Bonds Payable………………………………………………………………………Page 8

Capital Leases……………………………………………………………………….Page 9

Conclusion…………………………………………………………………………...Page 10

References……………………………………………………………………………Page 11-12
 Page |3

Introduction

In 1962, Walmart Inc better known as WALMART, was founded by Sam Walton in Rodgers,

Arkansas. Today, they are still headquartered in Arkansas but in a town called Bentonville. Over

the years as the company grew, retail stores such as Sam Club discount warehouse and Walmart

Supercenters were developed. Since becoming one of the largest retail grocers in the United

States Walmart then expanded internationally into countries like Mexico, Canada, China,

Germany and the United Kingdom employing over 2.3 million people. Walmart’s fiscal year end

is January 31st.
 Page |4

1. What is the amount of property and equipment on the balance sheet for the 2 most recent
years? What is the amount of accumulated depreciation and the depreciation expense?

2020 2019

Property and equipment, net $105,208,000 $104,317.00

Land $24,619,000 $24,526,000

Accumulated Depreciation $89,820,000 $81,493,000

Depreciation and Amortization $10,987,000 $10,678,000

What amounts are on the cash flow statement for the most recent year that relate to
depreciation, gains and sales of property and equipment, and purchases and sale of
property of equipment?

 Consolidated Net Income $15,201

 Net Cash provided by Operating Activities $25,255
 Net Cash Used In Investing Activities $(9,128)
 Net Cash Used In Financing Activities $(14,299)
 Net Cash Flow from Financing Activities (16,117)
 Effect of exchange rates on cash, cash equivalents and restricted cash $(69)
 Cash, cash equivalents and restricted cash at end of year $9,515

What amounts are permitted for inclusion in the capitalized cost of property and equipment?

2. Looking at the footnote disclosures of the company, what are the individual components
of property and equipment? For example, what are the amounts for land, building,
equipment, accumulated depreciation, and so forth?

 Land $24,619,000
 Building and improvement $105,674,000
 Fixtures and Equipment $58,607,000
 Accumulated Depreciation $89,820,000
 Property under capital leases and intangible assets $11,000,000,000
 Page |5

How do companies account for nonmonetary exchange and dispositions of property and
equipment?

To account for nonmonetary exchange a boot payment is considered as part of the

transaction. The boot is the amount of difference between the fair market value and the asset
exchanged.

3. Does the company have intangible assets? If so, what are the types of intangible assets
(patent, copyrights, etc.) and their amounts? What is the amount of accumulated
amortization and amortization expense? What amounts on the most recent cash flow
statement relate to the purchase and sale of intangible assets? How do intangible assets
differ from property and equipment? What costs do we include in intangible assets?

Yes, the company does have intangible assets. According to note12, Trade Names worth
$4.7billion and Acquired Technology worth $0.3 billion. The amount of accumulated
amortization/expense is $11 billion

Intangible assets are nonphysical items like patents, trademarks, copyrights, or licenses
while property and equipment are Tangible assets that can be touched physically

4. Does the company have goodwill? What are the footnote disclosures relating to goodwill
and the related acquisition?

Yes, the company does have good will.

Please also describe the calculation of goodwill and how we account for differences
between fair value and book value of assets acquired.

Goodwill = (Consideration paid + Fair value of non-controlling interests + Fair value of

equity interests) – Fair value of net identifiable assets

5. What are the company's depreciation methods?

Walmart uses straight-line depreciation on building and improvements, land, fixtures

and equipment, transportation equipment, and construction progress.
 Page |6

What is the range of estimated useful lives used for depreciating its assets?

Cars and automotive equipment: 3-6 years

Furniture: 5-12 years

Machinery and equipment: 3-20 years

Property, buildings and renovations: 10-50 years

Does the company use the same depreciation methods for financial statements and tax
returns? If not, please describe the methods used for tax purposes.

Yes, the company uses the same depreciation methods for financial statements and tax
returns.

6. What are the company's footnote disclosures relating to impairment? Please also describe
how to determine whether an impairment exists and how to calculate the impairment
loss.

To determine whether an impairment exists, the assets fair value will be less than its
carrying value on the balance sheet. To calculate the impairment loss, you will minus
the carrying cost from the recoverable amount.

7. What are the amounts and descriptions of the company's current liabilities for the most
recent year? Does the company have any contingent liabilities? If yes, please describe
them. Does the company have any subsequent events disclosed in its footnotes? If so,
please describe them.

Short-Term Borrowings $575,000,000

Accounts Payable $46,973,000

Current Accrued Liabilities $22,296,000

Accrued Income Tax $280,000,000

Long Term Debt Due Within One Year $5,362,000

Operating Lease Obligations Due Within One Year $1,793,000

 Page |7

Finance Lease Obligations Due Within One Year $511,000,000

The company does have contingent liabilities. According to not 10 sub-headed contingencies, the
company is involved in several legal proceedings and have made accruals which are reflected on
the company’s consolidated financial statement.

8. What are the amounts and descriptions for all of the company's long-term liabilities on its
balance sheet for the 2 most recent years? What is the interest expense for the 2 most
recent years? What amounts are included in the cash flow statements for proceeds from
issuance of debt and repayment of debt for the most recent year? For each note payable
discussed in the footnotes disclosures, what is the interest rate, total amount borrowed,
and maturity date?

Long-Term Liabilities

2020 2019

Long-Term Debt $43,714,000 $43,520,000

Long-Term Operating Lease Obligations $16,171,000 $0

Long-Term Finance Lease Obligations $4,307,000 $0

Long-Term Capital Lease & Financing Obligations $0 $6,683,000

Deferred Income Taxes & Other $12,961,000 $11,981,000

Interest Expense

2020 2019

Debt $2,262,000 $1,975,000

Finance, Capital Lease & Financing Oblig. $337,000,000 $371,000,000

Interest Income ($189,000,000) ($217,000,000)

Proceeds from Issuance/Repayment of Debt

Net Change in short-term borrowings ($4,656,000)

 Page |8

Proceeds from issuance of long-term debt $5,492,000

Repayment of long-term debt $1,907,000

Dividends Paid ($6,048,000)

Purchase of company stock ($5,717,000)

Dividends paid to noncontrolling interest ($555,000,000)

Other Financing Activities ($908,000,000)

Note Payable 2020

Issue Date Principal Maturity Date Fixed VS Interest Rate Net Proceeds
Amt Floating
23-Apr-2019 $1,500,000 08-Jul-2024 Fixed 2.850% $1,493,000
23-Apr-2019 $1,250,000 08-Jul-2026 Fixed 3.050% $1,242,000
23-Apr-2019 $1,250,000 08-Jul-2029 Fixed 3.250% $1,243,000
24-Sep-2019 $500,000,000 24-Sep-2029 Fixed 2.375% $497,000,000
24-Sep-2019 $1,000,000 24-Sep-2029 Fixed 2.950% $975,000,000
Various $42,000,000 Various Various Various $42,000,000

9. Does the company have bonds payable? If so, what are the amounts? Please also describe
how bonds payable differ from notes payable and how to account for the issuance of
bonds at par, at a discount, and at a premium. How is the discount and premium
amortized? What is the effective interest method?

Yes, the company does have bonds payable. According to Accountingtools.com, "Bonds
payable is a liability account that contains the amount owed to bondholders by the
issuer. A note payable is a written promissory note. Under this agreement, a borrower
obtains a specific amount of money from a lender and promises to pay it back with
interest over a predetermined time." They both differ by the type of borrowing
agreement it represents. The difference of face value and the amount of cash received is
recorded in a discount on bonds payable account to account for bonds at a discount. The
difference of face value and amount of cash received is recorded in a premium on bonds
payable account for premiums. The bond payable liability account will be credited for
bonds issued at par, and cash will be credited. The difference of face value and the
amount of cash received is recorded in a discount on bonds payable account to account
for bonds at a discount. The difference of face value and amount of cash received is
recorded in a premium on bonds payable account for premiums. The bond payable
liability account will be credited for bonds issued at par, and cash will be credited.
 Page |9

10. Does the company have capital leases? If so, what are the amounts and terms of the
leases? What are the four criteria for a lease to be considered a capital lease? What are
the additional criteria for the lessor? What is the difference between a sales-type lease
and a direct-financing lease?

Yes, the company odes have capital lease.

The criteria for a lease to be considered a capital lease are as follows:

 Once the lease is expired, the lessee can purchase an asset at a bargain price.
 The lessee gets the ownership of the asset after the lease expires.
 The lease term is at least 75% of the estimated economic life of the asset.
 The present value of lease payment is at least 90% of the asset’s value.

A lessor must account for a capital lease as an operating lease, direct-financing lease, or a
sales type lease. Capitalization must be recognized if the collection of the monthly lease
payments is reasonably predictable, or the lessor’s performance is substantially complete.
A direct-financing lease is the coupling of a sale and financing transaction in which the
lessor removes the leased asset from its books and replaces it with a receivable from the
lessee.
 P a g e | 10

Conclusion
 P a g e | 11

References

Britannica, T. Editors of Encyclopedia (2021, August 12). Walmart. Encyclopedia Britannica.

https://www.britannica.com/topic/Walmart

(n.d.) Useful Life. How do I calculate an asset’s useful life? Debitoor.

https://debitoor.com/dictionary/useful-life

(2021, April 14). Exchange of nonmonetary assets definition. Accounting for an Exchange of

Nonmonetary Assets. Accounting Tools. https://www.accountingtools.com/articles/exchange-of-

nonmonetary-assets.html

Tuovila, A. (2021, April 19). Impairment. What is impairment? Investopedia.

https://www.investopedia.com/terms/i/impairment.asp

(2021). About Us. Walmart. https://corporate.walmart.com/our-story

(2021, April 9th). Bonds payable definition. What is Bonds Payable? Accounting

Tools. https://www.accountingtools.com/articles/2017/5/10/bonds-payable#:~:text=Bonds

%20payable%20is%20a%20liability,in%20more%20than%20one%20year.&text=Bonds%20are

%20typically%20issued%20by%20larger%20corporations%20and%20governments (Links to an

external site.).

(2021, June 22nd). Notes payable definition. What are Notes Payable? Accounting

Tools. https://www.accountingtools.com/articles/what-are-notes-payable.html

(2021). Finance Lease and Operating Lease. Business

Jargons. https://businessjargons.com/finance-lease-and-operating-lease.html
 P a g e | 12

Walton, S. (2020). Walmart Inc. 2020 Annual Report. https://corporate.walmart.com/media-

library/document/2020-walmart-annualreport/_proxyDocument?id=00000171-a3ea-dfc0-af71-

b3fea8490000