The following information was summarized from the consolidated balance sheets of Walgreen Co. and Subsidiaries as of August 31, 2010 and 2009 and the consolidated statements of earnings for the years ended August 31, 2010 and 2009.

(in millions) 2010 2009

Accounts receivable, net..............$ 2,450..........$ 2,496

Cost of sales.............................48,444...........45,722

Inventories................................7,378............6,789

Net sales.................................67,420...........63,335

Required

1. Identify and analyze the transactions related to the collection of accounts receivable and sales during 2010. Assume that all of Walgreen's sales are on account.

2. Walgreen Co. sets forth net sales but not gross sales on its income statement. What type(s) of deduction(s) would be made from gross sales to arrive at the amount of net sales reported? Why might the company decide not to report the amount(s) of the deduction(s) separately?

3. Reconstruct the Cost of Goods Sold section of Walgreen's 2010 income statement.

4. Calculate the gross profit ratios for Walgreen Co. for 2010 and 2009 and comment on the change noted, if any. Is the company's performance improving? What factors might have caused the change in the gross profit ratio?