Concept explainers
Real World Case 9–8
Various inventory issues; Chapters 8 and 9; Fred’s Inc.
• LO9–1, LO9–5, LO9–6
Real World Financials
Fred’s Inc. operates general merchandise retail discount stores and full-service pharmacies in the Southeastern United States. Access the company’s 10-K for the fiscal year ended January 30, 2016. You can find the 10-K by using EDGAR at www.sec.gov. Answer the following questions.
Required:
1. What inventory methods does Fred’s use to value its inventory?
2. Which price index does the company use in applying the retail inventory method?
3. A company that uses LIFO is allowed to provide supplemental disclosures reporting the effect of using another inventory method rather than LIFO. Using the supplemental LIFO disclosures provided by Fred’s, determine the income effect of using LIFO versus another method for the current fiscal year.
4. Calculate the company’s inventory turnover ratio for the fiscal year ended January 30, 2016.
5. Assume that in the next fiscal year the company decides to switch to the average cost method. Describe the accounting treatment required for the switch.

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Chapter 9 Solutions
INTER. ACCOUNTING - CONNECT+ALEKS ACCESS
- When a company pays rent in advance, it should record:A. Rent ExpenseB. Unearned Rent RevenueC. Prepaid Rent (Asset)D. Accrued Rentarrow_forwardIf total liabilities are $25,000 and owner’s equity is $15,000, total assets equal:A. $10,000B. $25,000C. $40,000D. $15,000arrow_forwardDon't use chatgpt When a company pays rent in advance, it should record:A. Rent ExpenseB. Unearned Rent RevenueC. Prepaid Rent (Asset)D. Accrued Rentarrow_forward
- No Chatgpt please 5. What is the normal balance of the Dividends account?A. DebitB. CreditC. Zero balanceD. Depends on the type of dividendarrow_forwardDon't use ai tool 4. A purchase of equipment for cash will:A. Increase assetsB. Decrease total assetsC. Have no effect on assetsD. Increase liabilitiesarrow_forwardNo AI tool 5. What is the normal balance of the Dividends account?A. DebitB. CreditC. Zero balanceD. Depends on the type of dividendarrow_forward
- Don't use AI Which account is not closed at the end of the accounting period?A. RevenueB. ExpenseC. DividendsD. Suppliesarrow_forwardNo use chatgpt Which financial statement reports cash inflows and outflows?A. Balance SheetB. Statement of Cash FlowsC. Income StatementD. Statement of Retained Earningsarrow_forwardNo Chatgpt When a company collects cash from a customer in advance, it should:A. Recognize revenue immediatelyB. Record a liabilityC. Record it as equityD. Ignore it until revenue is earnedarrow_forward
- Please don't use ai 5. What is the normal balance of the Dividends account?A. DebitB. CreditC. Zero balanceD. Depends on the type of dividendarrow_forwardDon't use ChatGPT! 5. What is the normal balance of the Dividends account?A. DebitB. CreditC. Zero balanceD. Depends on the type of dividendarrow_forwardNo chatgpt 5. What is the normal balance of the Dividends account?A. DebitB. CreditC. Zero balanceD. Depends on the type of dividendarrow_forward
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