week 3 Kroger Company_Sharon Worley.docx

week 3 Kroger Company_Sharon Worley.docx - Week 3 Learning...

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Week 3 Learning Team C (Madison Feanny, Nicholas Hall, Robyn Hargrave, Sharon Worley) ACC/421 – Intermediate Financial Accounting II Sept. 04, 2017 Frank Drabick
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Week 3 Learning Team C Week 3 Learning Team C Table of Contents Case 3: The Kroger Company ............................................................................................................... 3 (1) Cost of sales and LIFO inventory: ............................................................................................. 3 (2) Cost of sales and FIFO inventory .............................................................................................. 3 (1) Sales and LIFO inventory .......................................................................................................... 4 (2) Sales and FIFO inventory .......................................................................................................... 4 (c) State which method you would choose to evaluate Kroger’s performance. Justify your choice. ................................................................................................................................................. 4 Works Cited ............................................................................................................................................... 11 ACCOUNTING 422 Intermediate Financial Accounting II
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Week 3 Learning Team C Case 3: The Kroger Company The Kroger Company reported the following data in its annual report (in millions). January 31, 2015 February 1, 2014 February 2, 2013 Net sales $108,465 $98,375 $96,619 Cost of sales (using LIFO) 85,512 78,138 76,726 Year-end inventories using FIFO 6,933 6,801 6,244 Year-end inventories using LIFO 5,688 5,651 5,146 (a) Compute Kroger’s inventory turnovers for fiscal years ending January 31, 2015, and February 1, 2014, using: (1) Cost of sales and LIFO inventory: Kroger’s inventory turnover for the fiscal year ending January 31, 2015, for the cost of sales using LIFO would be 15.08. Their inventory turnover for February 1, 2014, for the cost of sales using the LIFO method would be 14.47. LIFO Formula: January 31, 2015: 85,512/((5,688+5,651)/2) = 15.08 February 1, 2014: 78,138/((5,651+5,146)/2) = 14.47 (2) Cost of sales and FIFO inventory. Kroger’s inventory turnover for the fiscal year ending January 31, 2015, for the cost of sales using FIFO would be 12.45. Their inventory turnover for February 1, 2014, for the cost of sales using the FIFO method would be 11.98. FIFO Formula: January 31, 2015: 85,512/((6,933+6,801)/2) = 12.45 February 1, 2014: 78,138/((6,801+6,244)/2) = 11.98
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Week 3 Learning Team C (b) Some firms calculate inventory turnover using sales rather than cost of goods sold in the numerator. Calculate Kroger’s fiscal years ending January 31, 2015, and February 1, 2014, turnover, using: (1) Sales and LIFO inventory. Kroger’s inventory turnover for the fiscal year ending January 31, 2015, for sales using LIFO would be 19.13. Their inventory turnover for February 1, 2014, for the sales using the LIFO method would be 18.22.
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