1. In the summary of significant accounting policies, what is Buckle\'s procedur
ID: 2498486 • Letter: 1
Question
1. In the summary of significant accounting policies, what is Buckle's procedure in accounting for inventory?
2. For the most recent year, what is the amount of inventory in the balance sheet? What does this amount represent?
3. Buckle refers to its cost of goods sold using a different name. What is it?
4. For the most recent year, what is the amount of cost of goods sold in the income statement? What does this amount represent?
5. Calculate Buckle's inventory turnover ratio and average days in inventory for the most recent year.
6. Calculate Buckle's gross profit ratio for each of the three years. Do you notice any trend?
7. For the most recent year, calculate Buckle's ratio of operating expenses to net sales.
Explanation / Answer
Inventory is valued at the lower of cost or market. Cost is determined using an average cost method that approximates the first-in, first-out (FIFO) method. Management makes adjustments to inventory and cost of goods sold, based upon estimates, to account for merchandise obsolescence and markdowns that could affect market value, based on assumptions using calculations applied to current inventory levels within each different markdown level
Combining question 2 and 5 iam answering it that Inventory turnover measures how fast the company turns over its inventory within a year. It is calculated as cost of goods sold divided by average inventory. Buckle Inc's cost of goods sold for the three months ended in Oct. 2015 was$163 Mil. Buckle Inc's average inventory for the quarterthat ended in Oct. 2015 was $163 Mil. Buckle Inc's inventory turnover for the quarter that ended in Oct. 2015was 1.00.
Days inventory indicates the number of days of goods in sales that a company has in the inventory. Buckle Inc'sdays inventory for the three months ended in Oct. 2015was 91.47.
Inventory can be measured by Days Sales of Inventory (DSI). Buckle Inc's days sales of inventory (DSI) for the three months ended in Oct. 2015 was 53.19.
Inventory to revenue ratio determines the ability of a company to manage their inventory levels. It measures the percentage of Inventories the company currently has on hand to support the current amount of Revenue. Buckle Inc's inventory to revenue ratio for the quarter that ended in Oct. 2015 was 0.58.
Definition
Buckle Inc's Inventory Turnover for the fiscal year that ended in Jan. 2015 is calculated as
Buckle Inc's Inventory Turnover for the quarter that ended in Oct. 2015 is calculated as
Inventory Turnover (Q: Oct. 2015 )
question no 3 and 4 the name for cost of goods sold used is total merchandise expense which falls under direct cost and the amount represents that the company has spend the amount to arive at the net merchandise margin.
Question no 6 and 7 :
Gross profit after buying, distribution, and occupancy expenses decreased from $94.9 million in the second quarter of fiscal 2014 to $94.6 million in the second quarter of fiscal 2015, a 0.3% decrease. As a percentage of net sales, gross profit declined from 40.3% in the second quarter of fiscal 2014 to 40.1% in the second quarter of fiscal 2015. The decrease was primarily attributable to deleveraged occupancy, buying, and distribution expenses as a result of the comparable store sales decline (0.75%, as a percentage of net sales); which was partially offset by an improvement in merchandise margins (0.55%, as a percentage of net sales).
Year-to-date, gross profit decreased from $212.1 million for the twenty-six week period ended August 2, 2014 to $208.2 million for the twenty-six week period ended August 1, 2015, a 1.9% decrease. As a percentage of net sales, gross profit declined from 41.8% for the first two quarters of fiscal 2014 to 41.0% for the first two quarters of fiscal 2015. The decrease was primarily attributable to deleveraged occupancy, buying, and distribution expenses as a result of the comparable store sales decline (0.90%, as a percentage of net sales); which was partially offset by an improvement in merchandise margins (0.10%, as a percentage of net sales).
Inventory Turnover (A: Jan. 2015 ) = Cost of Goods Sold / Average Inventory = Cost of Goods Sold (A: Jan. 2015 ) / ( (Inventory (A: Jan. 2014 ) + Inventory (A: Jan. 2015 )) / 2 ) = 645.81 / ( (124.141 + 129.921) / 2 ) = 645.81 / 127.031 = 5.08Related Questions
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