Freds Inc. operates general merchandise retail discount stores and full-service pharmacies in the Southeastern United States. Access

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Fred’s Inc. operates general merchandise retail discount stores and full-service pharmacies in the Southeastern United States. Access the company’s 10-K for the fiscal year ended January 28, 2017. You can find the 10-K by using EDGAR at www.sec.gov (Hint: do not use the apostrophe in the company name when doing an Edgar search.) Answer the following questions.


Required:
1. What inventory methods does Fred’s use to value its inventory?
2. Which price index does the company use in applying the retail inventory method?
3. A company that uses LIFO is allowed to provide supplemental disclosures reporting the effect of using another inventory method rather than LIFO. Using the supplemental LIFO disclosures provided by Fred’s, determine the pretax income effect of using LIFO versus another method for the current fiscal year.
4. Calculate the company’s inventory turnover ratio for the fiscal year ended January 28, 2017.
5. Assume that in the next fiscal year the company decides to switch to the average cost method. What approach would Fred’s take to account for this change (retrospective, modified retrospective, or prospective)?

Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally.    Inventory Turnover Ratio FormulaWhere,...
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Intermediate Accounting

ISBN: 978-1260481952

10th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas

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