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Chapter 9: Question E9-23 (page 481)

The financial statements of ConAgra Foods, Inc.’s 2014 annual report disclose the following information. (in millions) 2014 2013 2012 Year-end inventories \(2,201 \)2,077 \(2,341 Fiscal Year 2014 2013 Net sales \)17,703 $15,427 Cost of goods sold 13,980 11,864 Net income 315 786Instructions Compute ConAgra’s (a) inventory turnover and (b) the average days to sell inventory for 2014 and 2013.

Short Answer

Expert verified
  1. Inventory turnover for 2013 and 2014 equals 5.37 times and 6.54 times.
  2. Average days to sell inventory for 2013 and 2014 equals 67.97 days and 55.81 days

Step by step solution

01

Calculation of inventory turnover for 2013

Inventory turnover for 2013 is calculated as follows:

InventoryTurnoverfor2013=CostofGoodsSoldBeginningInventory+EndingInventory2=$11,864$2,341+$2,0772=5·37

02

Calculation of average days to sell inventory for 2013

Average days to sell inventory is calculated as follows:

AverageDaystoSellInventory=365InventoryTurnoverfor2013=3655.37=67·97Days

03

Calculation of inventory turnover for 2014

Inventory turnover for 2014 is calculated as follows:

InventoryTurnoverfor2014=CostofgoodssoldBeginningInventory+EndingInventory2=$13,980$2,077+$2,2012=6·54

04

Calculation of average days to sell inventory for 2014

Average days to sell inventory is calculated as follows:

AverageDaystoSellInventory=365InventoryTurnoverfor2014=3656·54=55·81Days

Thus inventory turnover for 2013 and 2014 is 5.37 and 6.54, and the average days to sell inventory for 2013 and 2014 are 67.97 days and 55.81 days.

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Most popular questions from this chapter

Starfish Company (a company using GAAP and the LIFO inventory method) is considering changing to IFRS and the FIFO inventory method. How would a comparison of these methods affect Starfish’s financials? (a) During a period of inflation, working capital would decrease when IFRS and the FIFO inventory method are used as compared to GAAP and LIFO. (b) During a period of inflation, the taxes will decrease when IFRS and the FIFO inventory method are used as compared to GAAP and LIFO. During a period of inflation, net income would be greater if IFRS and the FIFO inventory method are used as compared to GAAP and LIFO. (d) During a period of inflation, the current ratio would decrease when IFRS and the FIFO inventory methodare used as compared to GAAP and LIFO.

Fuque Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2018. Inventory, October 1, 2018 At cost \( 52,000 At retail 78,000 Purchases (exclusive of freight and returns) At cost 272,000 At retail 423,000 Freight-in 16,600 Purchase returns At cost 5,600 At retail 8,000 Markups 9,000 Markup cancellations 2,000 Markdowns (net) 3,600 Normal spoilage and breakage 10,000 Sales revenue 390,000 Instructions (a) Using the conventional retail method, prepare a schedule computing estimated lower-of-cost-or-market inventory for October 31, 2018. (b) A department store using the conventional retail inventory method estimates the cost of its ending inventory as \)60,000. An accurate physical count reveals only $47,000 of inventory at lower-of-cost-or-market. List the factors that may have caused the difference between the computed inventory and the physical count.

Question:In some instances, accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases using LCNRV. Cases 1 2 3 4 5 Cost \(15.90 \)16.10 \(15.90 \)15.90 $15.90 Sales value 14.80 19.20 15.20 10.40 17.80 Estimated cost to complete 1.50 1.90 1.65 .80 1.00 Estimated cost to sell .50 .70 .55 .40 .60

Referring to the situation in P9-2 for Garcia Home Improvement Company, consider the following expanded data at May 31, 2017. Assume Garcia uses LIFO inventory costing. Problems 483 Replacement Sales Net Realizable Normal Cost Cost Price Value Profi t Aluminum siding \( 70,000 \) 62,500 \( 64,000 \) 56,000 \( 5,100 Cedar shake siding 86,000 79,400 94,000 84,800 7,400 Louvered glass doors 112,000 124,000 186,400 168,300 18,500 Thermal windows 140,000 126,000 154,800 140,000 15,400 Total \)408,000 \(391,900 \)499,200 \(449,100 \)46,400 Instructions (a) (1) Determine the proper balance in Allowance to Reduce Inventory to Market at May 31, 2017. (2) For the fiscal year ended May 31, 2017, determine the amount of the gain or loss that would be recorded due to the change in Allowance to Reduce Inventory to Market. (b) Explain the rationale for the use of the lower-of-cost-or-market rule as it applies to inventories

In its 2015 annual report, Gap Inc. reported inventory of \(1,889 million on January 31, 2015, and \)1,928 million on February 1, 2014, cost of goods sold of \(10,146 million for 2015, and net sales of \)16,435 million. Compute Gap’s inventory turnover and the average days to sell inventory for the fiscal year 2015
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