High Liner Foods Incorporated, which is headquartered in Lunenburg, Nova Scotia, operates in the North American packaged foods industry. The company's brands include High Liner, Fisher Boy, FPI, Sea Cuisine, Mirabel, and Royal Sea. The company also manufactures products for private labels. The information in Exhibit 7-25 was taken from the company's 2014 annual report.

Problem:

a.

Note 8 (Exhibit 7-25D) breaks down High Liner's inventory into numerous categories. Which categories of inventory do you believe should be used in determining the inventory turnover ratio? Why?

b.

Describe High Liner's inventory valuation policies in your own words. Specifically, explain what High Liner includes in inventory cost, what cost formula(s) the company uses, and how it values its inventory on the statement of financial position.

c.

Does High Liner use the same cost formula for all of its inventories? If not, explain what methods are used for which inventories and why this might be the case.

d.

Calculate the inventory turnover ratio and days to sell inventory ratio for 2013 and 2012. Use the year-end inventory balances instead of the average inventory amounts.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (in thousands of U.S. dollars) ASSETS Current: Notes 28-Dec-13 29-Dec-12 note 27 S 1,206 91,334 3,509 1,524 254,072 2,952 354,597 $65 73,947 5,145 533 222,313 2,991 304,994 as Accounts receivable Income taxes receivable Other financial assets Inventories Prepaid expenses Total current assets Non-current: Property, plant and equipment Deferred income taxes Other receivables and miscellaneous assets Intangible assets Goodwill 97,503 4,656 1,906 105,253 111,999 321,317 542 S 676,456 89,268 7,207 2,035 110,631 112,873 322,014 4,819 S 631,8217 20 Total non-current assets Assets classified as held for sale Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current: Bank loans Accounts payable and accrued liabilities Provisions S 97,227 103,215 240 $59,704 101,441 1,614 12 10