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Basic Components of Pension Expense And Company Leaning on Trading

Question

1. Selected recent balance sheet and income statement information for American Eagle Outfitters and The Gap, Inc. follows:

American Eagle Outfitters

 

The Gap, Inc.

(in thousands)

2011

 

(in millions)

2011

Year-end accounts payable

$183,783

 

Year-end accounts payable

$1,066

Average accounts payable

175,753

 

Average accounts payable

1,058

Sales

3,159,818

 

Sales

14,549

Cost of goods sold

2,031,477

 

Cost of goods sold

9,275

Which of the two companies listed above is leaning on the trade more?

A) American Eagle because its accounts payable turnover is greater and its accounts payable days outstanding is lower.
B) Gap because its accounts payable turnover is lower and its accounts payable days outstanding is higher.
C) Gap because its accounts payable turnover is higher and its accounts payable days outstanding is lower.
D) American Eagle because its accounts payable turnover is lower and its accounts payable days outstanding is higher.
E) Gap because its accounts payable turnover is lower and its accounts payable days outstanding is lower.

2. What are the three basic components of pension expense?

A) Service cost, benefits paid, and expected return on plan assets
B) Service cost, benefits paid, and actual return on plan assets
C) Service cost, interest cost, and actual return on plan assets
D) Service cost, interest cost, and expected return on plan assets
E) None of the above

Summary

These short answer questions belong to Finance. The 1st question is about estimating 1 out of the 2 company leaning on trade more and the 2nd question is about the three basic components of pension expense.

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