Ascertain (1) the cost of goods sold during the year and (2) the inventory at the end of the year under the retail method.

Question

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Answer 1

Question

Chapter 8, Problem 7PB

a.

To determine

Ascertain (1) the cost of goods sold during the year and (2) the inventory at the end of the year under the retail method.

b. 1.

To determine

Ascertain the cost of ending inventory under cost method, use cost ratio.

b. 2.

To determine

Ascertain the shrinkage losses incurred by Company S during the year.

b. 3.

To determine

Ascertain the gross profit of Company S, if inventory shrinkage losses included in the cost of goods sold.

c.

To determine

Explain the controls that would implement to reduce the inventory shrinkage.

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Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's expenses, Gross margin, and Net income?

Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

Answer 2

Question

Chapter 8, Problem 7PB

a.

To determine

Ascertain (1) the cost of goods sold during the year and (2) the inventory at the end of the year under the retail method.

b. 1.

To determine

Ascertain the cost of ending inventory under cost method, use cost ratio.

b. 2.

To determine

Ascertain the shrinkage losses incurred by Company S during the year.

b. 3.

To determine

Ascertain the gross profit of Company S, if inventory shrinkage losses included in the cost of goods sold.

c.

To determine

Explain the controls that would implement to reduce the inventory shrinkage.

Expert Solution & Answer

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Answer 3

Question

Chapter 8, Problem 7PB

a.

To determine

Ascertain (1) the cost of goods sold during the year and (2) the inventory at the end of the year under the retail method.

b. 1.

To determine

Ascertain the cost of ending inventory under cost method, use cost ratio.

b. 2.

To determine

Ascertain the shrinkage losses incurred by Company S during the year.

b. 3.

To determine

Ascertain the gross profit of Company S, if inventory shrinkage losses included in the cost of goods sold.

c.

To determine

Explain the controls that would implement to reduce the inventory shrinkage.

Expert Solution & Answer

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Answer 4

Question

Chapter 8, Problem 7PB

a.

To determine

Ascertain (1) the cost of goods sold during the year and (2) the inventory at the end of the year under the retail method.

b. 1.

To determine

Ascertain the cost of ending inventory under cost method, use cost ratio.

b. 2.

To determine

Ascertain the shrinkage losses incurred by Company S during the year.

b. 3.

To determine

Ascertain the gross profit of Company S, if inventory shrinkage losses included in the cost of goods sold.

c.

To determine

Explain the controls that would implement to reduce the inventory shrinkage.

Expert Solution & Answer

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Answer 5

Chapter 8, Problem 7PB

a.

To determine

Ascertain (1) the cost of goods sold during the year and (2) the inventory at the end of the year under the retail method.

b. 1.

To determine

Ascertain the cost of ending inventory under cost method, use cost ratio.

b. 2.

To determine

Ascertain the shrinkage losses incurred by Company S during the year.

b. 3.

To determine

Ascertain the gross profit of Company S, if inventory shrinkage losses included in the cost of goods sold.

c.

To determine

Explain the controls that would implement to reduce the inventory shrinkage.

Answer 6

Chapter 8, Problem 7PB

a.

To determine

Ascertain (1) the cost of goods sold during the year and (2) the inventory at the end of the year under the retail method.

Answer 7

Chapter 8, Problem 7PB

a.

To determine

Ascertain (1) the cost of goods sold during the year and (2) the inventory at the end of the year under the retail method.

Answer 8

b. 1.

To determine

Ascertain the cost of ending inventory under cost method, use cost ratio.

Answer 9

b. 1.

To determine

Ascertain the cost of ending inventory under cost method, use cost ratio.

Answer 10

b. 2.

To determine

Ascertain the shrinkage losses incurred by Company S during the year.

Answer 11

b. 2.

To determine

Ascertain the shrinkage losses incurred by Company S during the year.

Answer 12

b. 3.

To determine

Ascertain the gross profit of Company S, if inventory shrinkage losses included in the cost of goods sold.

Answer 13

b. 3.

To determine

Ascertain the gross profit of Company S, if inventory shrinkage losses included in the cost of goods sold.

Answer 14

c.

To determine

Explain the controls that would implement to reduce the inventory shrinkage.

Answer 15

c.

To determine

Explain the controls that would implement to reduce the inventory shrinkage.

Answer 16

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Answer 17

Expert Solution & Answer

Answer 18

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Answer 19

Ch. 8 - Prob. 1STQ Ch. 8 - Prob. 2STQ Ch. 8 - Prob. 3STQ Ch. 8 - Prob. 4STQ Ch. 8 - Prob. 5STQ Ch. 8 - Prob. 6STQ Ch. 8 - Prob. 1DQ Ch. 8 - Prob. 2DQ Ch. 8 - Prob. 3DQ Ch. 8 - Prob. 4DQ

Ascertain (1) the cost of goods sold during the year and (2) the inventory at the end of the year under the retail method.

Ascertain (1) the cost of goods sold during the year and (2) the inventory at the end of the year under the retail method.

Ascertain the cost of ending inventory under cost method, use cost ratio.

Ascertain the shrinkage losses incurred by Company S during the year.

Ascertain the gross profit of Company S, if inventory shrinkage losses included in the cost of goods sold.

Explain the controls that would implement to reduce the inventory shrinkage.

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Chapter 8 Solutions