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    A Identify The Time at Which Nike Recognizes Revenues Does

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    Muhammad Shahid
    Nike recognizes revenue when products are shipped to customers. This timing aligns with when risks and rewards of ownership transfer. Nike uses first-in, first-out (FIFO) to value inventory, which matches current costs with current revenues. Depreciation expense does not appear on the income statement because it is a non-cash expense that is deducted from revenues to calculate cash flow from operations.

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    A Identify The Time at Which Nike Recognizes Revenues Does

    Uploaded by

    Muhammad Shahid
    130 views3 pages
    Nike recognizes revenue when products are shipped to customers. This timing aligns with when risks and rewards of ownership transfer. Nike uses first-in, first-out (FIFO) to value inventory, which matches current costs with current revenues. Depreciation expense does not appear on the income statement because it is a non-cash expense that is deducted from revenues to calculate cash flow from operations.

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    A Identify the Time at Which Nike Recognizes Revenues Does

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    A Identify the Time at Which Nike Recognizes Revenues Does

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    Nike recognizes revenue when products are shipped to customers. This timing aligns with when risks and rewards of ownership transfer. Nike uses first-in, first-out (FIFO) to value inventory, which matches current costs with current revenues. Depreciation expense does not appear on the income statement because it is a non-cash expense that is deducted from revenues to calculate cash flow from operations.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    130 views3 pages

    A Identify The Time at Which Nike Recognizes Revenues Does

    Uploaded by

    Muhammad Shahid
    Nike recognizes revenue when products are shipped to customers. This timing aligns with when risks and rewards of ownership transfer. Nike uses first-in, first-out (FIFO) to value inventory, which matches current costs with current revenues. Depreciation expense does not appear on the income statement because it is a non-cash expense that is deducted from revenues to calculate cash flow from operations.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    A Identify the time at which Nike recognizes revenues

    Does #6997
    a. Identify the time at which Nike recognizes revenues. Does this timing of revenue recognition
    seem appropriate? Explain.b. Identify the cost-flow assumption(s) that Nike uses to measure
    cost of goods sold. Does Nike's choice of cost-flow assumption(s) seem appropriate? Explain.c.
    Nike reports property, plant, and equipment on its balance sheet and discloses the amount of
    depreciation for each year in its statement of cash flows. Why doesn't depreciation expense
    appear among its expenses on the income statement?d. Identify the portion of Nike's income
    tax expense of $469.8 million for 2009 that is currently payable to governmental entities and the
    portion that is deferred to future years. Why is the amount currently payable to governmental
    entities in 2009 greater than the income tax expense?e. Why do accounts receivable appear net
    of allowance for doubtful accounts? Identify the events or transactions that cause the allowance
    account to increase or decrease.f. Identify the depreciation method(s) that Nike uses for its
    buildings and equipment. Does Nike's choice of depreciation method(s) seem appropriate?g.
    Nike includes identifiable intangible assets on its balance sheet as an asset. Does this account
    include the value of the Nike name and Nike's ''swoosh'' trademark? Explain.h. Nike includes
    deferred income taxes among current assets, noncurrent assets, and noncurrent liabilities.
    Under what circumstances will deferred income taxes give rise to an asset? To a liability?i. Nike
    reports accumulated other comprehensive income of $367.5 million at the end of 2009 and
    $251.4 million at the end of 2008, implying that other comprehensive income items amounted to
    $116.1 million during 2009. Why is this ''income'' reported as part of shareholders' equity and
    not part of net income in the income statement?j. Why does the amount of net income differ
    from the amount of cash flow from operations?k. Why does Nike add depreciation expense back
    to net income when calculating cash flow from operations?l. Why does Nike subtract deferred
    income taxes from net income when calculating cash flow from operations for 2009?m. Why
    does Nike subtract increases in accounts receivable to net income when calculating cash flow
    from operations for 2009?n. Why does Nike adjust net income by subtracting increases in
    inventory and adding decreases in inventory when calculating cash flow from operations?o.
    When calculating cash flow from operations, why does Nike adjust net income by adding
    increases and subtracting decreases in accounts payable and other current liabilities?p. Nike
    recognized a gain from the divestiture of the subsidiary for the Bauer line of hockey apparel and
    equipment in 2008. Why does Nike subtract the gain on the divestiture from the operating
    activities? Why does Nike include the proceeds from the divestiture as an investing activity?q.
    Given that notes payable appear on the balance sheet as a current liability, why does Nike
    include increases in this liability as a financing activity rather than as an operating activity?r.
    Compute the amount of cash collected from customers during 2009.s. Compute the amount of
    cash payments made to suppliers of merchandise during 2009.t. Prepare an analysis that
    accounts for the change in property, plant, and equipment and accumulated depreciation during
    2009. You will have to plug certain amounts if Nike does not disclose them.u. Identify the
    reasons for the change in retained earnings during 2009.v. Exhibit 1.35 presents common-size
    and percentage change income statements for Nike for 2007, 2008, and 2009. What are the
    likely reasons for the higher net income/sales revenue percentages for Nike between 2007 and
    2008? What are the likely reasons for the lower net income/sales revenue percentages for Nike
    between 2008 and 2009?w. What are the likely reasons for the decrease in the cost of goods
    sold to sales percentages between 2007 and 2009?x. What are the likely reasons for the
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    increase in the selling and administrative expenses to sales percentages between 2007 and
    2009?y. Exhibit 1.36 presents common-size and percentage change balance sheets for Nike at
    the end of 2007, 2008, and 2009. What is the likely explanation for the relatively small
    percentages for property, plant, and equipment?Continue to the next page...z. What is the likely
    explanation for the relatively small percentages for notes payable and long-term debt?a.a. What
    is the likely explanation for the small decreases in property, plant, and equipment for Nike for
    2008 and 2009?b.b. Refer to the statement of cash flows for Nike in Exhibit 1.33. Cash flow
    from operations exceeded net income during all three years. Why?c.c. How has Nike primarily
    financed its acquisitions of property, plant, and equipment during the three years?d.d. What are
    the likely reasons for the repurchases of common stock during the three years?e.e. The
    dividends paid by Nike increased each year ($343.7 million in 2007, $412.9 million in 2008, and
    $466.7 million in 2009). Given that Nike repurchased its stock each year, what is the likely
    explanation for the increasing amount of dividends?Nike, Inc.'s principal business activity
    involves the design, development, and worldwide marketing of high-quality footwear, apparel,
    equipment, and accessory products for serious and recreational athletes. Almost 25,000
    employees work for the firm as of 2009. Nike boasts the largest worldwide market share in the
    athletic footwear industry and a leading market share in sports and athletic apparel.This case
    uses Nike's financial statements and excerpts from its notes to review important concepts
    underlying the three principal financial statements (balance sheet, income statement, and
    statement of cash flows) and relations among them. The case also introduces tools for
    analyzing financial statements.Industry analysts debate whether the athletic footwear and
    apparel industry is a performance driven industry or a fashion-driven industry. Proponents of the
    performance view point to Nike's dominant market position, which results in part from continual
    innovation in product development. Proponents of the fashion view point to the difficulty of
    protecting technological improvements from competitor imitation, the large portion of total
    expenses comprising advertising, the role of sports and other personalities in promoting athletic
    shoes, and the fact that a high percentage of athletic footwear and apparel consumers use the
    products for casual wear rather than the intended athletic purposes (such as playing basketball
    or running).There are only modest growth opportunities for footwear and apparel in the United
    States. Concern exists with respect to volume increases (how many pairs of athletic shoes will
    consumers tolerate in their closets) and price increases (will consumers continue to pay prices
    for innovative athletic footwear that is often twice as costly as other footwear).Athletic footwear
    companies have diversified their revenue sources in two directions in recent years. One
    direction involves increased emphasis on international sales. With dress codes becoming more
    casual in Europe and East Asia and interest in American sports such as basketball becoming
    more widespread, industry analysts view international markets as the major growth markets
    during the next several years. Increased emphasis on soccer (European football) in the United
    States aids companies such as Adidas that have reputations for quality soccer footwear.The
    second direction for diversification is sports and athletic apparel. The three leading athletic
    footwear companies capitalize on their brand name recognition and distribution channels to
    create a line of sportswear that coordinates with their footwear. Team uniforms and matching
    apparel for coaching staffs and fans have become a major growth avenue. For example, to
    complement Nike's footwear sales, Nike acquired Umbro, a major brand-name line of jerseys,
    shorts, jackets, and other apparel in the soccer market?Essentially all athletic footwear and
    most apparel are produced in factories in Asia, primarily China (40%), Indonesia (31%),
    Vietnam, South Korea, Taiwan, and Thailand. The footwear companies do not own any of these
    manufacturing facilities. They typically hire manufacturing representatives to source and
    oversee the manufacturing process, helping to ensure quality control and serving as a link
    between the design and the manufacture of products. The manufacturing process is labor-
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    intensive, with sewing machines used as the primary equipment. Footwear companies typically
    price their purchases from these factories in U.S. dollars?View Solution:
    A Identify the time at which Nike recognizes revenues Does

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