Selected disclosures related to Foot Locker Company€™s inventory are provided below. Use these disclosures to answer the following questions:
a. What percentage of inventory at the end of 2013 is accounted for under each cost- flow assumption that Foot Locker uses?
b. Why would Foot Locker use LIFO for domestic U. S. inventories but FIFO for international inventories?
c. How does Foot Locker apply the retail inventory method?
d. What types of costs are included in the cost of sales?
e. Why does Foot Locker not report a LIFO reserve?
f. What is Foot Locker€™s gross profit percentage in 2011, 2012, and 2013?
g. What is Foot Locker€™s inventory turnover ratio and days inventory on hand in 2013?
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Foot Locker, Inc Consolidated Statements of Operations 2013 2012 2011 (in millions) Sales S6,505 $6,182 4.148 $5,623 3,827 Cost of sales From Financial Statement Notes: NOTE 1: Summary of Significant Accounting Policies (excerpt) 4,372 Merchandise Inventories and Cost of Sales Merchandise inventories for the Company's Athletic Stores are valued at the lower of cost or market using the retail inventory method. Cost for retail stores is determined on the last-in, first-out ("LIFO basis for domestic inventories and on the first-in, first-out (FIFO basis for international inventories. The retail inventory method is commonly used by retail companies to value inventories at cost and calculate gross margins due to its practicality. Under the retail inventory method, cost is determined by applying a cost-to-retail percentage across groupings of similar items, known as departments. The cost-to-retail percentage is applied to ending inventory at its current owned retail valuation to determine the cost of ending inventory on a department basis. The Company provides reserves based on current selling prices when the irnventory has not been marked down to market. Merchandise inventories of the Direct-to-Customers businass are valued at the lower of cost or market using weighted-average cost, which approximates FIFO. Transportation, distribution center, and sourcing costs are capitalized in mer- chandise inventories. The Company expenses the freight associated with transfers between its store locations in the period incurred. The Company maintains an accrual for shrinkage based on historical rates. . . Cost of sales is comprised of the cost of merchandise, occupancy, buyers' compensation, and shipping and handing costs. The cost of merchandise is recorded net of amounts received from vendors for damaged product returns, markdown allowancas, and volume rebates, as well as cooperative adver tising reimbursements received in excess of specific, incremental advertising expenses. Occupancy includes the amortization of amounts received from landlords for tenant improvements. NOTE 6: Merchandise Inventories 2013 2012 (in millions) LIFO inventories FIFO inventories Total merchandise inventories S 746 S 474 $1,220 S 752 S 415 $1.167 The value of the Company's LIFO inventories, as calculated on a LIFO basis, approximates their value as calculated on a FIFO basis Source: http://www.sec.gov/Archives/edgar/data/850209/000114420414019510/v367190 10khtm