For Questions 1-4, referring to AEO's latest 10-K, ignoring SBC included in COGS, what is gross profit for the year ending 1/30/2016?

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Multiple Choice

For Questions 1-4, referring to AEO's latest 10-K, ignoring SBC included in COGS, what is gross profit for the year ending 1/30/2016?

Explanation:
Gross profit is net sales minus cost of goods sold. When the problem asks you to ignore stock-based compensation (SBC) that’s included in COGS, you remove that SBC amount from COGS before calculating gross profit. In other words, use COGS excluding SBC, not COGS as reported, and subtract that from net sales. For AEO’s year ending 1/30/2016, applying that adjustment yields a gross profit of 1,323,734. This aligns with removing the SBC portion embedded in COGS and using the adjusted COGS in the calculation. The other numbers would come from using the unadjusted COGS (including SBC) or from different misapplications of the adjustment.

Gross profit is net sales minus cost of goods sold. When the problem asks you to ignore stock-based compensation (SBC) that’s included in COGS, you remove that SBC amount from COGS before calculating gross profit. In other words, use COGS excluding SBC, not COGS as reported, and subtract that from net sales.

For AEO’s year ending 1/30/2016, applying that adjustment yields a gross profit of 1,323,734. This aligns with removing the SBC portion embedded in COGS and using the adjusted COGS in the calculation. The other numbers would come from using the unadjusted COGS (including SBC) or from different misapplications of the adjustment.

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