Chapter 5, Problem 5.1DC

Comparing Two Companies in the Same Industry: Chipotle and Panera Bread

Refer to the financial information for Chipotle and Panera Bread reproduced at the end of this book and answer the following questions:

Required

1. What is the dollar amount of inventories that each company reports on its balance sheet at the end of the most recent year? What percentage of total assets do inventories represent for each company? What does this tell you about the nature of their business?
2. Refer to Note 1 in Chipotle’s annual report. What inventory valuation method does the company use?
3. Refer to Note 2 in Panera Bread’s annual report. What inventory valuation method does the company use?
4. How do both companies deal with situations in which the market value of inventory is less than its cost?
5. Given the nature of their businesses, which inventory system, periodic or perpetual, would you expect both Chipotle and Panera Bread to use? Explain your answer.