Chapter: 4

1. Difference between consolidated balance sheet and classified balance sheet:

A consolidated balance sheet and a classified condensed balance sheet both provide an overview of a
company’s financial position. Gildan Activewear Inc. prepared consolidated balance sheet and (Exhibit 4-
14, page-204) Ivaco products company prepared classified Balance sheet. Beyond that, though they are
considerably different. Gildan consolidated balance sheet combines the assents of the parent and all of
the subsidiaries into a single asset section. It does the same with liabilities, and the shareholders equity’s’
of the parent and subsidiary. Ivaco products company classified balance sheet reduces the information
from a standard balance sheet to a few lines. For example, the asset section of typical balance sheet is
divided into current and long term assets.

2. Gildan total currents assets:

We considering previous two years financial data of Gildan Activewear In c. from the consolidated Balance
Sheets.

Amount in Dollar

2011 2010
Cash and cash equivalents 88,802 258,442
Trade accounts receivable 191.594 145,68
Income tax receivable 515 ----
Inventories 575,594 332,542
Prepaid expense and deposits 10,966 9,584
Future income Taxes 11,666 6,340
Other Currents Assets 9,307 9,079

Total currents assets 888,444 761,671

Total currents assets for 2011 is $ 888444

Total currents assets for 2010 is $ 761671

3. Value of total currents liabilities:

We are considering previous two years financial data of Gildan Activewear Inc. from the consolidated
Balance Sheets.

Amount in Dollar

2011 2010
Accounts payable and accrued liabilities 315269 186205
Income taxes payable ---- 5024
315,269 291,229
Total currents liabilities for 2011 is $315,269

Total currents liabilities for 2010 is $191,229

4. Current ratio of previous year:

To determine the currents ratio of previous year, we are considering previous two years financial data of
Gildan Activewear Inc. from the required 2 and 3.

Current ratio = Currents Asset / Currents liabilities

Gildan Activewear Gildan Activewear

Oct. 2, 2011 Oct. 3, 2010
Current Assets 888,444 761671
Currents liabilities 315,269 191229
2.82 3.08

In 2011 Gildan Activewear Inc. current Assets exceed its currents liabilities by 2.82 times. In 2010 Gildan
Activewear Inc. current Assets exceed its current liabilities by 3.08 times.

A higher current ratio indicates a stronger company. As a result in 2010 Gildan Activewear Inc. have a
greater ability to use their current assets to pay short term debt.

Although in 2011 Gildan Active wear Inc. current ratio is below the 2010 current ratio, it’s still deemed
acceptable by investors (currents rat6ios 2 to 1 and higher acceptable)

5. Debt. Ratio:
The debt ratio measures the extent to which borrowed money has been used to finance a
company’s operation. Investors like to see a debt ratio, since it shows a company is relying less on
creditors (such as banks supplies etc.) to finance the operation. The Gildan Activewear Inc. in 2011
Debt ratio and 2010 debt ratio are calculated below.

Amount in Dollar

Current liabilities 2011 2010

Accounts payable and accrued liabilities 315,269 186,205

Income taxes payable --- 5024

315,269 191,229
Long term debt. 209000 ---
Future income tax 26575 10816
Non-controlling interest in consolidated joint venture 11562 11058
Total debt. 562,406 212,103
 We have already calculated total assets in page ______
Debt ratio = Total debt / Total Assets

Gildan Activewear Gildan Activewear

Oct. 2, 2011 Oct. 3, 2010
Total Debt 562,406 213,103
Total Assets 1,889,721 1,327,532
Debt. Ratio .2976 .1605

In 2011 Gildan Activewear Inc. debt ratio is .2976. This means 29.76% of the company’s assets are finance
by creditors. For every one dollar the company has in assets, it has 58 cents in debt. On the end of
continuum, in 2010 Gildan Activewear Inc. has a debt ratio of .1605. This means 16.05 of its asset finance
by creditors.

As a result, in 2011 Gildan will have higher principal payments and interest charges relative to others form
in the industry. Higher principal payments and interest expenses will ultimate reduce the company’s cash
flow and net income.

6. Main purpose of the notes:

The main purpose of the notes to the financial statements is to further clarify accounting procedures used
by a company as well as to divulge information that has occurred during and immediately after the close
of accounting period. The financial Accounting Standards Board (FASB) wanted to ensure that all
interested individuals have reliable information on company performance.

Chapter: 5

Gildan’s closing entries

The consolidated statements of earnings and comprehensive income provides this information.

Closing Entries

Date Account Name Debit Credit

2011 Sales revenue $1,726,041
1 Oct Income summary $1,726,041
(To close the revenue account and create the
income summary account)
2 Oct. Income Summary
Cost of sales $1,288,293
 Selling general and administrative expense $199,132
Restructuring and acquisition related costs $8,465
Financial Expense (Income) $5,485
Non-controlling interest in consolidated $504
joint venture
(To close the contra-revenue accounts and
expense accounts)

Income summary $224,162

Gildan retained earning account $224,162

Gildan retained earning account $ 27,496

Gildan Dividend $27,496

3. We can find the answer from the Gildan Activewear Inc. consolidated Balance Sheet.

On October 2, 2012 shown on the balance sheet for inventory account is $575,594

On October 3 , 2010 show on the balance sheet for inventory account is $332,542.

For further calculation, Inventories were composed of the following:

Amount in dollar

2011 2010
Finished goods 469,600 240,884
Raw materials and spare parts inventories 74,284 54,353
Work in process 31,710 37,305
Inventories 575,594 $332,542

Raw material in 2010 is $54,353

Raw materials in 2011 is $74,284

Finished goods in 2010 is $240,884

Finished goods in 2011 is $469,600

Work in process in 2010 is $37,305

Work in process in 2011 is $31,710

Chapter 6

1. Net realizable value (NRV) and write down.

For inventories, net realizable value generally means the expected selling price (that is, the amount the
business could get if it sold the inventory less the costs of selling it). If the net realizable value of inventory7
falls below its historical cost, Gildan Activewear Inc. must write down the value of inventory.

We can see the write down balance of inventory from the consolidated statements of cash flows.

Write down in Oct 2, 2011 ` $182,080

Write down inventory in Oct 3, 2010 $32,280

2. Valuation method of inventory:

Significant accounting policies in note 1 shows that Gildan used for valuing each category of inventory is
the valuation of inventory at the lower of cost and Net Realizable Value (NRV)

MISSING PAGE

In October 2 2011 total revenue increases 32.61% comparing that of 2010.

5. We are considering previous two years financial data of Gildan Activewear Inc. from the consolidated
statements of earnings and comprehensive income.
 Amount in dollars

2011 2010
Net sales 1,726,041 1,311,463
Cost of Sales 1,288,293 947,206
Gross Profit 437,748 364,257
Selling general and administrative expense 199,132 154,674
Restructuring and acquisition related costs 8,465 8705
Operating income 230,151 200,878
\Financial Expense (income) 5.485 752
Non-controlling in consolidated joint venture 504 3786
Earnings before income taxes 224,162 196,341
Income taxes (15,742) (1904)
239,904 198,245

In October 2, 2011 Gildan experience of net income $ 239,904

Net income changes in percentage:

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑖𝑛 2011 − 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑖𝑛 2010 $239,904 − $ 198,245

∗ 100% = ∗ 100%
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑖𝑛 2010 $198,245
= 21.01%

As shown above information, total Net income in October 2, 2011 increases (21.01%) from October 3,
2010.

Comments: 2011 was a good year compared to 2010.