Financial statements are interrelated and connected to one another. A change on one financial statement will have an impact on other financial statements. For example, if a corporation neglected to record a \($10,000\) cash payment for July rent, the cash amount reported on the balance sheet would be overstated. On the income statement, the net income would also be overstated, due to the \($10,000\) missing in the rent expense account. Since net income increases the retained earnings, the amount of retained earnings listed on the statements of stockholders' equity would be incorrect. And finally, since the amount of net income and year-end cash balance are reported on the statement of cash flows, that financial statement would be incorrect as well. 

Instructions: Refer to Costco's financial statements shown on pages B-6 through B-9 in Appendix B of this textbook to answer the following questions. 

1. Identify the amount of net income reported on the income statement for the year ended September 3, 2006. 

2. Locate the dollar amount calculated in question 1 on Costco's statements of stockholders' equity. Identify the title of the section containing the amount. 

3. Locate the dollar amount in question 1 on Costco's statements of cash flows. Identify the title of the section containing the amount. 

4. Can you locate the dollar amount calculated in question 1 on Costco's balance sheet? Explain. 

5. List the financial statements that would be affected by a failure to account for a \($200,000\) cash expenditure for advertising.

Data from pages B-6 through B-9 in Appendix B

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CURRENT ASSETS COSTCO WHOLESALE CORPORATION CONSOLIDATED BALANCE SHEETS (dollars in thousands, except par value) ASSETS September 3, 2006 August 28, 2005 Cash and cash equivalents. Short-term investments Receivables, net Merchandise inventories Deferred income taxes and other current assets Total current assets PROPERTY AND EQUIPMENT Land Buildings, leasehold and land improvements 4,568,723 $ 1,510,939 1,322,181 565,373 $ 2,062,585 1,397,272 529,150 4,014,699 264,866 234,295 8,232,082 8,238,001 2,747,396 2,502,247 6,241,357 5,622,439 Equipment and fixtures 2,405,229 2,181,740 Construction in progress 248,454 180,604 11,642,436 10,487,030 Less accumulated depreciation and amortization... (3,078,141) (2,696,838) Net property and equipment 8,564,295 7,790,192 OTHER ASSETS 698,693 637,012 $17,495,070 $16,665,205 LIABILITIES AND STOCKHOLDERS' EQUITY