Obtain Wal-Mart’s 2010 annual report either through the “Investor Relations” portion of its website (do a web search for Wal-Mart investor relations) or go to www.sec.gov and click “Search for company filings” under “Filings and Forms (EDGAR).”
Required:
1. What amount did Wal-Mart report for inventories in its consolidated balance sheets at January 31, 2010? At January 31, 2009?
2. What inventory valuation method does Wal-Mart use to determine the cost of its inventories?
3. What amount did Wal-Mart report for cost of goods sold for 2010, 2009, and 2008?
4. Compute the gross profit (rounded to one decimal place) and inventory turnover (rounded to two decimal places) ratios for 2010. What do these ratios tell you?
5. Does Wal-Mart use the lower of cost or market method to account for its inventory? Does it appear that Wal-Mart will write down its inventory to market value?
6. What would be the effect on the financial statements if Wal-Mart were to overstate its inventory by 1 percent?