Refer to the financial statements of The Home Depot in Appendix A. (http://lectu
ID: 2471774 • Letter: R
Question
Refer to the financial statements of The Home Depot in Appendix A. (http://lectures.mhhe.com/connect/0078025915/appendix_a.pdf)
How much inventory does the company hold on February 2, 2014? Does this represent an increase or decrease in comparison to the prior year?
What method(s) does the company use to determine the cost of its inventory? Describe where you found this information.
Compute to one decimal place the company’s inventory turnover ratio and days to sell for the year ended February 2, 2014.
Refer to the financial statements of The Home Depot in Appendix A. (http://lectures.mhhe.com/connect/0078025915/appendix_a.pdf)
1.How much inventory does the company hold on February 2, 2014? Does this represent an increase or decrease in comparison to the prior year?
$11,057, which is an increase $10,710, which is an increase $10,710, which is a decrease $11,057, which is a decreaseWhat method(s) does the company use to determine the cost of its inventory? Describe where you found this information.
LIFO; Note 1 FIFO; Note 1 Specific Identification; Management’s Discussion and Analysis Weighted average cost; the Balance SheetCompute to one decimal place the company’s inventory turnover ratio and days to sell for the year ended February 2, 2014.
7.1 and 51.4 4.7 and 77.7 7.2 and 50.7 4.8 and 76.0Explanation / Answer
Answer 1- $11,057 which is an increase in Inventory as compared to last year which was $10,710.
Answer 2- The Company uses FIFO method to value majority of its inventory which is mentioned in Note 1, Summary of Significant Accounting Policies appearing on pages A9 and A10 of the report. It is to be added that value of inventory is adjusted regularly to reflect market conditions to reflect the lower of Cost or Market Value of Inventory.
Answer 3- 7.2 and 50.7 as calculated below
Inventory Turn Over Ratio= Cost of Goods Sold or Sales/ Average Inventory
= $78,812/ (11,057+ 10,710)/2= 7.2
Days to Sell= 365 Days/ Inventory Turnover
= 365/7.2= 50.7 days