LaTour Inc. is based in France and prepares its financial statements in accordance with IFRS. In 2017, it reported cost of goods sold of $578 million and average inventory of $154 million. Briefly discuss how analysis of LaTour’s inventory turnover (and comparisons to a company using GAAP) might be affected by differences in inventory accounting between IFRS and GAAP.
The inventory turnover ratio is 3.75 times.
The inventory turnover ratio is calculated as follows:
The inventory turnover ratio is the financial ratio, which measures the number of times the average inventory of the business is converted into sales. The inventory turnover ratio is 3.75 times, which indicates that the average inventory is converted by 3.75 times into sales.
Remmers Company manufactures desks. Most of the company’s desks are standard models and are sold on the basis of catalog prices. At December 31, 2017, the following finished desks (10 desks in each category) appear in the company’s inventory. Finished Desks A B C D 2017 catalog selling price $45 $48 $90 $105 FIFO cost per inventory list 12/31/17 47 45 83 96 Estimated cost to complete and sell 5 11 26 20 2018 catalog selling price 50 54 90 120 The 2017 catalog was in effect through November 2017, and the 2018 catalog is effective as of December 1; catalog prices are net of the usual discounts.
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
Retail Inventory Method—Conventional and LIFO) Leonard Company began operations late in 2016 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2016 and no markdowns during 2016, the ending inventory for 2016 was $14,000 under both the conventional retail method and the LIFO retail method. At the end of 2017, management wants to compare the results of applying the conventional and LIFO retail methods. There was no change in the price level during 2017. The following data are available for computations. Cost Retail Inventory, January 1, 2017 $14,000 $20,000 Sales revenue 80,000 Net markups 9,000 Net markdowns 1,600 Purchases 58,800 81,000 Freight-in 7,500 Estimated theft 2,000 Instructions Compute the cost of the 2017 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method
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