PART B Financial Statement Inferences related to Inventory

Use Rite Aids financial statements to answer the following questions.

• What inventory flow assumption did Rite Aid use to value most of its inventory? Why do you think they chose that assumption?

Rite Aide used the last-in, first-out (LIFO) cost flow assumption for substantially all of its inventories.

• Find or compute Inventory and COGS (a) in Rite Aids existing financial statements and (b) if Rite Aid had instead used FIFO to value its inventory.

	Current Financial Statements (i.e., primarily LIFO)	If company had instead used only FIFO
Inventory at 2/28/23
Inventory at 2/28/22
COGS for year ended 2/28/23

• What were Rite Aids approximate tax savingsin the most recent fiscal year from using LIFO rather than FIFO? Assume a tax rate of 20%.

• What were Rite Aids approximate cumulativetax savings from using LIFO rather than FIFO? Assume a tax rate of 20%.

• Calculate Rite Aids Days Inventory for the two most recent fiscal years. Do these ratios suggest Rite Aid managed its inventory better in the year ended 2/28/23 or 2/28/22?

\begin{tabular}{|c|c|c|c|} \hline \multicolumn{4}{|c|}{CONSOLIDATEDBALANCESHEETSInmillions} \\ \hline & AsofFeb28,2023 & AsofFeb28,2022 & AsofFeb28,2021 \\ \hline \multicolumn{4}{|l|}{ ASSETS } \\ \hline Cash \& cash equivalents & $157.1 & $39.7 & $160.9 \\ \hline Accounts receivable, net & 1,150.0 & 1,343.5 & 1,462.4 \\ \hline Inventories & 1,900.7 & 1,9594 & 1,814.9 \\ \hline Prepaid expenses and other current assets & 93.2 & 106.8 & 157.0 \\ \hline Total current assets & 3,301.0 & 3,4494 & 3.5952 \\ \hline Property, plant and equipment, net. & 907.8 & 989.2 & 1,080.5 \\ \hline Operating lease right-of-use assets & 2,497.2 & 2,813.5 & 3,064.1 \\ \hline Goodwill & 507.9 & 879.1 & 1,108 \\ \hline Other intangible assets, net & 250.1 & 291.2 & 340.5 \\ \hline Other long-term assets & 634 & 106.6 & 147.0 \\ \hline Total assets & $7,527.4 & $8,5290 & $9,335.4 \\ \hline \multicolumn{4}{|l|}{ LIABILITIES \& STOCKHOLDERS' EQUITY } \\ \hline Current maturities of long-term debt & $6.3 & $5.5 & $6.4 \\ \hline Accounts payable & 1,494.6 & 1,5713 & 1,4374 \\ \hline Accrued salaries, wages and other current liabilities & 724.5 & 780.6 & 642.4 \\ \hline Current portion of operating lease liabilities & 502.5 & 575.7 & 516.7 \\ \hline Total current liabilities & 2,7279 & 2,9331 & 2,602.9 \\ \hline Long-tem debt, less current maturities & 2,925.3 & 2,7330 & 3,063.1 \\ \hline Long-tem operating lease liabilities & 2,372.9 & 2,597.1 & 2,8293 \\ \hline Other long-term obligations & 1430 & 166.8 & 225.0 \\ \hline Total liabilities & 8,169.1 & 8,430.0 & 8,7203 \\ \hline Common stock and additional paid-in capital & 5,974.5 & 5,966.0 & 5,952.3 \\ \hline Retained earnings & (6,601.5) & (5,851.6) & (5,3131) \\ \hline Accumulated other comprehensive loss & (14.7) & (154) & (24.1) \\ \hline Total stockholders' equity & (641.7) & 99.0 & 6151 \\ \hline Total liabilities \& stockholders' equity & $7,5274 & $8,529.0 & $9,335.4 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline \multicolumn{4}{|c|}{CONSOLIDATEDINCOMESTATEMENTSInmillions,exceptpershareamounts} \\ \hline & YearendedFeb28,2023 & YearendedFeb28,2022 & YearendedFeb28,2021 \\ \hline Net sales & $24,568.3 & $24,043.2 & $21,928.4 \\ \hline Cost of goods sold & 19,461.8 & 19,338.9 & 17,201.6 \\ \hline Gross margin & 5,106.5 & 4,7043 & 4,726.8 \\ \hline Selling, general and administrative expense & 5,0339 & 4,657.2 & 4,587.3 \\ \hline Facility exit and impairment charges & 180.2 & 584 & 42.8 \\ \hline Goodwill and intangble impairment charges & 229.0 & 29.9 & - \\ \hline Income from operations & (336.6) & (41.2) & 96.7 \\ \hline Interest expense & 191.6 & 2014 & 229.7 \\ \hline Other expense/(income), net & 14.0 & (131.5) & (68.4) \\ \hline Income before income taxes & (542.2) & (111.1) & (64.6) \\ \hline Income tax expense/(benefit) & (3.8) & (20.2) & 387.6 \\ \hline Net income & $(5384) & $(90.9) & $(452.2) \\ \hline \end{tabular}