BTN 5-3
Apple financial statements for fiscal years ended after September 26, 2015, from its website (Apple.com) or the SEC S EDGAR database (SEC. Answer questions through 5 using the cur rent Apple information and compare results to those prior years. IN 5-2 Comparative figures for Apple and Microsoft follow Smillions Apple Microsoft Current One Yeart Two Years Current One Year Two Years Year Prior Prior Year Prior Pulo sventory........ $ 2.349 $ 2.111 1.764 $ 2,902 $ 2.560 $ 1938 Cast of sales ....... .. 140,089 112.258 106 606 33033 27.078 20,385 Required 4. Compute inventory turnover for each company for the most recent two years shown. 2. Compute days' sales in inventory for each company for the three years shown. 2. Comment on and interpret your findings from parts 1 and 2. Assume an industry average for inventory turnover of 15. KTN 5.3 Golf Challenge Corp. is a retail sports store carrying Rolf apparel and equipment. The store is al the end of its second year of operation and is struggling. A major problem is that its cost of inventory has continually increased in the past two years. In the first year of operations, the store assigned inventory costs using LIFO. A loan agreement the store has with its bank, its prime source of financing, requires the store to maintain a certain profit margin and current ratio. The store's owner is currently looking over Golf Challenge's preliminary financial statements for its second year. The numbers are not favorable. The only way the store can meet the required financial ratios agreed on with the bank is to change from LIFO to FIFO. The store originally decided on LIFO because of its tax advantages. The owner recalculates ending inventory using FIFO and submits those numbers and statements to the loan officer at the bank for the required bank review. The owner thankfully reflects on the available latitude in choosing the inventory costing method. Required 1. How does Golf Challenge's use of FIFO improve its net profit margin and current ratio? 2. Is the action by Golf Challenge's owner ethical? Explain. BTN 5-4 You are a financial adviser with a client in the wholesale produce business that just completed its first year of operations. Due to weather conditions, the cost of acquiring produce to resell has escalated during the later part of this period. Your client, Javonte Gish, mentions that because her business sells perishable goods, she has striven to maintain a FIFO flow of goods. Although sales are good, the increas- ing cost of inventory has put the business in a tight cash position. Gish has expressed concern regarding the ability of the business to meet income tax obligations. Required Prepare a memorandum that identifies, explains, and justifies the inventory method you recommend your client, Ms. Gish, adopt. Access the September 26, 2015. 10-K report for Apple, Inc. (ticker: AAPL), filed on October 28, 2015, from the EDGAR filings at SEC.gov
