Refer to the RadioShack Corporation consolidated financial statements in Appendix B at the end of this book. Show amounts in millions and round to the nearest $1 million.
1. Three important pieces of inventory information are
(a) The cost of inventory on hand,
(b) The cost of sales, and
(c) The cost of inventory purchases. Identify or compute each of these items for RadioShack Corporation at December 31, 2010.
2. Which item in Requirement 1 is most directly related to cash flow? Why?
3. Assume that all inventory purchases were made on account, and that only inventory purchases increased Accounts Payable. Compute RadioShack Corporation’s cash payments for inventory during 2010.
4. How does RadioShack Corporation value its inventories? Which costing method does RadioShack Corporation use?
5. Did RadioShack Corporation’s gross profit percentage and rate of inventory turnover improve or deteriorate in 2010 (versus 2009)? Consider the overall effect of these two ratios. Did RadioShack Corporation improve during 2010? How did these factors affect the net income for 2010? RadioShack Corporation’s inventories totaled $636.3 million at the end of fiscal 2008. Round decimals to three places.