Case 3: The Kroger Company, p. 440 Net sales January 31, 2015 February 1, 2014 February 2, 2013 $108,465 $98,375 $96,619 $78,138 ?
$6,801 ?? $76,726
$6,244 $5,651 ?? $5,146 Cost of sales (using LIFO) ??$85,512 ?
Year-end inventories ???
$6,933 ??
using FIFO
Year-end inventories ???
$5,688 ??
using LIFO Compute Kroger’s inventory turnovers for fiscal years ending January 31, 2015, and February 1, 2014, using:
(1) Cost of sales and LIFO inventory.
(2) Cost of sales and FIFO inventory
CA 8-10, p. 437 (FIFO and LIFO) Harrisburg Company is considering changing its inventory valuation method from
FIFO to LIFO because of the potential tax savings. However, management wishes to consider all of the
effects on the company, including its reported performance, before making the final decision. The
inventory account, currently valued on the FIFO basis, consists of 1,000,000 units at $8 per unit on
January 1, 2017. There are 1,000,000 shares of common stock outstanding as of January 1, 2017, and the
cash balance is $400,000.
The company has made the following forecasts for the period 2017–2019.
Unit sales (in millions of units)
Sales price per unit
Unit purchases (in millions of units)
Purchase price per unit
Annual depreciation (in thousands of dollars)
Cash dividends per share
Cash payments for additions to and replacement
of plant and equipment (in thousands of dollars)
Income tax rate
Operating expenses (exclusive of depreciation)
as a percent of sales
Common shares outstanding (in millions) 2017
$0.15 2018
$0.15 2019
$0.15 $350
40% $350
40% $350
40% 15%
1 15%
1 15%
1 (a) Prepare a schedule that illustrates and compares the following data for Harrisburg Company under the FIFO
and the LIFO inventory method for 2017–2019. Assume the company would begin LIFO at the beginning of
(1) Year-end inventory balances.
(2) Annual net income after taxes.
(3) Earnings per share.
(4) Cash balance. Assume all sales are collected in the year of sale and all purchases, operating expenses, and taxes are paid
during the year incurred.
(b) Using the data above, your answer to (a), and any additional issues you believe need to be considered,
prepare a report that recommends whether or not Harrisburg Company should change to the LIFO inventory
method. Support your conclusions with appropriate arguments. 1. Problem 9-3, p. 483 Malone Company determined its ending inventory at cost and at LCNRV at December 31, 2017, December
31, 2018, and December 31, 2019, as shown below. 12/31/17
12/31/19 Cost NRV $650,000
$905,000 $650,000
$830,000 Instructions
(a) Prepare the journal entries required at December 31, 2018, and at December 31, 2019, assuming that a
perpetual inventory system and the cost-of-goods-sold method of adjusting to LCNRV is used.
(b) Prepare the journal entries required at December 31, 2018, and at December 31, 2019, assuming that a
perpetual inventory is recorded at cost and reduced to LCNRV using the loss method. 2. Problem 9-13, p. 487 GROUPWORK (Retail, LIFO Retail, and Inventory Shortage) Late in 2014, Joan Seceda and four other
investors took the chain of Becker Department Stores private, and the company has just completed its third
year of operations under the ownership of the investment group. Andrea Selig, controller of Becker
Department Stores, is in the process of preparing the year-end financial statements. Based on the
preliminary financial statements, Seceda has expressed concern over inventory shortages, and she has asked
Selig to determine whether an abnormal amount of theft and breakage has occurred. The accounting records
of Becker Department Stores contain the following amounts on November 30, 2017, the end of the fiscal
Beginning inventory
Net markups
Net markdowns
Sales revenue $ 68,000
$255,000 Retail
$320,000 According to the November 30, 2017, physical inventory, the actual inventory at retail is $115,000. Instructions
(a) Describe the circumstances under which the retail inventory method would be applied and the advantages of
using the retail inventory method. 

(b) Assuming that prices have been stable, calculate the value, at cost, of Becker Department Stores’ ending
inventory using the last-in, first-out (LIFO) retail method. Be sure to furnish supporting calculations.
(c) Estimate the amount of shortage, at retail, that has occurred at Becker Department Stores during the year
ended November 30, 2017.
(d) Complications in the retail method can be caused by such items as (1) freight-in costs, (2) purchase returns
and allowances, (3) sales returns and allowances, and (4) employee discounts. Explain how each of these four
special items is handled in the retail inventory method.