Retained Earnings : The profit of the company which is retained for further business operations is called as retained earnings. Prior Period Adjustment: The rectification of those errors or mistakes which were committed earlier in financial statements is called as prior period adjustment. Cash Dividend: The amount that shareholders receive in cash in return of their investment is called as cash dividend. Company provides return to its shareholders by paying dividend which is out of profit of the company. Stock Dividend: When the company has fewer amounts of cash, it pays dividend to the shareholders in the form of extra shares in place of of cash payment. This payment is termed as stock dividend. To determine: The events that result in debits and credits of retained earnings.

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Chapter 14, Problem 11Q

To determine

Retained Earnings: The profit of the company which is retained for further business operations is called as retained earnings.

Prior Period Adjustment: The rectification of those errors or mistakes which were committed earlier in financial statements is called as prior period adjustment.

Cash Dividend: The amount that shareholders receive in cash in return of their investment is called as cash dividend. Company provides return to its shareholders by paying dividend which is out of profit of the company.

Stock Dividend: When the company has fewer amounts of cash, it pays dividend to the shareholders in the form of extra shares in place of of cash payment. This payment is termed as stock dividend.

To determine: The events that result in debits and credits of retained earnings.

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Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's expenses, Gross margin, and Net income?

Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

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