last

9.

Throughout this course, many discussion opportunities come up where you need to respond to other people's opinions and comments. Address the Discussion topic after you have completed your reading.

Inventory Control Methods

Jeffrey Gennette is the CEO of Macy’s® (a United States retailer). Because Jeffrey’s bonus is based on the company's earnings, he has directed the controller to use FIFO as the inventory costing method. Jason did not tell the controller his real reason for the directive; instead, he stated that he thought FIFO better reflected the actual flow of inventory costs.

Review the following links and company websites then answer the questions.

· The University Record Online: University of Michigan

· Kohl's

· Macy’s

1. Jeffrey’s decision to select FIFO appropriate? Is it ethical? Is Jeffrey wrong if this will help the company and also benefit him too?

2. What are some of the pitfalls of a company basing a manager’s or CEO’s compensation on the company’s earnings?

3. Using the links provided for Kohl’s and Macy's® (a United States retailer); determine the inventory turnover ratio for the companies. What does this ratio tell you about these companies? How do the companies compare? You can reference pages 6–21 in your textbook.

4. Using the links provided for Kohl’s and Macys, calculate the number of days in inventory for the companies. What does this ratio tell you about these companies? How do the companies compare? You can reference pages 6–21 in your textbook.

Source: The University Record Online: University of Michigan. Retrieved from  http://www.ur.umich.edu/0304/Jan19_04/10.shtml

Source: Kohl’s. Retrieved from  https://investors.kohls.com/investors/default.aspx

Source: Macy’s, Inc. Retrieved from  https://www.macysinc.com/

10.

Effect of Ending Inventory Errors

Companies can determine the effect of ending inventory errors on the balance sheet by using the basic accounting equation: Assets = Liabilities + Owner’s Equity. How would the over or understatement of inventory impact assets, liability and owner’s equity.