American Eagle Outfitters, Inc. AP6-2 Financial information for American Eagle is presented in Appendix A at the end of the book. Required: 1. In the summary of significant accounting policies, what is American Eagle's procedure in accounting for inventory? pA-12
AE evaluates merchandise inventory at the lower of average cost or market, utilizing retail method. Average cost includes merchandise design and sourcing costs and related expenses. AE records merchandise receipts at the time merchandise is delivered to the foreign shipping port by the manufacturer; at this point the title and risk of loss is transferred to the company.
2. For the most recent year, what is the …show more content…
5. Calculate The Buckle's inventory turnover ratio and average days in inventory for the most recent year.
Average inventory = ($88,187+$83,963)/2= $86,075
Inventory turnover ratio = $497,668/(($88,187+$83,963)/2= 5.78
Average days in inventory = 365/ 5,78 = 63.1 days
6. Calculate The Buckle's gross profit ratio for each of the three years. Do you notice any trend? GPR 2008 = 254,538/619,888 = 0.411
GPR 2009=343,488/792,046 = 0.434
GPR 2010= 400,619/898,287 = 0.446
Gross profit ratio had been increasing through the period of 2008-2010, which indicates that company managed to generate more profit from sales compared to costs. The markup on inventory had been increasing.
7. For the most recent year, calculate The Buckle's ratio of operating expenses to net sales.
Ratio of OE to NS is = (168,741+32,416)/898,287 = 0.224
• Case AP6-4: American Eagle, Inc., vs. The Buckle, Inc.
American Eagle, Inc., vs. The Buckle, Inc. AP6-4 Financial information for American Eagle is presented in Appendix A at the end of the book, and financial information for The Buckle is presented in Appendix B at the end of the book. Required: 1. Which company carries a greater inventory balance as a percentage