Financial Statement Analysis Case 3 (Part Level Submission) The Kroger Company r

Question

Financial Statement Analysis Case 3 (Part Level Submission) The Kroger Company reported the following data in its annual report (in millions) January 31, February 1, February 2, 2015 2014 2013 Net sales Cost of sales (using LIFO) Year-end inventories using FIFO Year-end inventories using LIFO $108,465 85,512 6,933 5,688 $98,375 78,138 6,801 5,651 $96,619 76,726 6,244 5,146 Compute Kroger's inventory turnovers for fiscal years ending January 31, 2015, and February 1, 2014, using: (Round answers to 2 decimal places, e.g. 52.75.) 2015 2014 (1) Inventory turnover using cost of sales and LIFO inventory (2) Inventory turnover using cost of sales and FIFO inventory

Explanation / Answer

1.INVENTORY TURNOVER RATIO USING LIFO INVENTORY.

COST OF SALES/ AVERAGE INVENTORY

AVERAGE INVENTORTY= (OPENING INVENTORY + CLOSING INVENTORY)/2

2014= COST OF SALES= $78138

AVERAGE INVENTORY=($5146+$5651)/2=$5398.50

OPENING INVENTORY OF 2014= $5146( CLOSING INVENTORY OF 2013 WILL BE OPENING INVENTORY OF 2014

CLOSING INVENTORY 2014= 5651

RATIO=  $78138/$5398.50=14.4740 OR ROUND TO 14.47

2015

COST OF SALES= $85512

AVERAGE INVENTORY=($5651+$5688)/2=$5669.50

OPENING INVENTORY OF 2015= $5651( CLOSING INVENTORY OF 2014 WILL BE OPENING INVENTORY OF 2015

CLOSING INVENTORY 2015= 5688

RATIO=  $85512/$5669.50=15.08

2.INVENTORY TURNOVER USING COST OF SALES AND FIFO INVENTORY

2014= COST OF SALES= $78138

AVERAGE INVENTORY=($6244+$6801)/2=$6522.50

OPENING INVENTORY OF 2014= $6244( CLOSING INVENTORY OF 2013 WILL BE OPENING INVENTORY OF 2014

CLOSING INVENTORY 2014=6801

RATIO=  $78138/$6522.50=11.9797 OR ROUND TO 11.98

2015

COST OF SALES= $85512

AVERAGE INVENTORY=($6801+$6933)/2=$6867

OPENING INVENTORY OF 2015= $6801( CLOSING INVENTORY OF 2014 WILL BE OPENING INVENTORY OF 2015

CLOSING INVENTORY 2015= 6933

RATIO=  $85512/$6867=12.45

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