Intermediate Accounting, Thirteenth Edition

Chapter 9. INVENTORIES: ADDITIONAL VALUATION ISSUES

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

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What Do Inventory Changes Tell Us?

Department stores face an ongoing challenge: They need to keep enough inventory to meet customer demand, but not to accumulate too much inventory. If demand falls short of expectations, the department store may be forced to reduce prices on its existing inventory, thus losing sales revenue.

For example, the following table shows annual sales and inventory trends for major retailers, compared to the prior year.

Company	Sales	Inventory
Source: Company reports.
Nordstrom	+10.59%	+ 1.73%
Federated Department Stores	+ 2.40%	− 2.95%
JCPenney	+ 3.59%	+ 0.41%
Wal-Mart	+11.63%	+ 9.06%
May Department Stores	+ 8.23%	+13.34%
Target	+11.62%	+18.83%
Best Buy	+17.21%	+25.52%
Circuit ...