The Home Depot reported the following data (in millions) in its recent financial statements:

The Home Depot reported the following data (in millions) in its recent financial statements:


Year 2 Year 1
Net sales $67,997 $66,176
Total assets at the end of the year 40,125 40,877
Total assets at the beginning of the year 40,877 41,164


a. Determine the ratio of net sales to assets for The Home Depot for Year 2 and Year 1.
Round to two decimal places.
b. What conclusions can be drawn from these ratios concerning the trend in the ability of The Home Depot to effectively use its assets to generate sales?


Answer:
a.
Year 2: 1.68 {$67,997 ÷ [($40,125 + $40,877) ÷ 2]}
Year 1: 1.61 {$66,176 ÷ [($40,877 + $41,164) ÷ 2]}

b. These analyses indicate an increase in the effectiveness in the use of the assets to generate profits. A comparison with similar companies or industry averages would be helpful in making a more definitive statement on the effectiveness of the use of the assets.




On October 31, 2014, the balances of the accounts appearing in the ledger of Acorn Interiors Company, a furniture wholesaler, are as follows:


Accumulated Depr.—Building $142,000 Notes Payable $ 125,000
Administrative Expenses 300,000 Sales 1,375,000
Building 446,000 Sales Discounts 20,000
Cash 60,000 Sales Returns and Allow. 13,000
Cost of Merchandise Sold 650,000 Sales Tax Payable 3,000
Interest Expense 10,000 Selling Expenses 140,000
Jordan Davenport, Capital 180,000 Store Supplies 23,000
Jordan Davenport, Drawing 25,000 Store Supplies Expense 12,000
Merchandise Inventory 126,000



Prepare the October 31, 2014, closing entries for Acorn Interiors Company.


Answer:

2014 Closing Entries
Oct. 31 Sales 1,375,000
Income Summary 1,375,000
31 Income Summary 1,145,000
Administrative Expenses 300,000
Cost of Merchandise Sold 650,000
Interest Expense 10,000
Sales Discounts 20,000
Sales Returns and Allowances 13,000
Selling Expenses 140,000
Store Supplies Expense 12,000
31 Income Summary 230,000
Jordan Davenport, Capital 230,000
31 Jordan Davenport, Capital 25,000
Jordan Davenport, Drawing 25,000