Question

Abercrombie and Fitch is a leading retailer of casual apparel for men, women, and children. Assume that you are employed as a stock analyst and your boss has just completed a review of the new Abercrombie annual report. She provided you with her notes, but they are missing some information that you need. Her notes show that the ending inventory for Abercrombie in the current and previous years was $ 569,818,000 and \$ 385,857,000 , respectively. Net sales for the current year were $ 4,158,058,000 . Cost of goods sold was \$ 1,639,188,000 . Net income was $ 127,658,000 . For your analysis, you determine that you need to know the amount of purchases for the year.
Required:
Can you develop the information from her notes? Explain and show calculations. (Hint: Use the cost of goods sold equation or the inventory T-account to solve for the needed value.)

Answer 1

Cost of Goods Sold = Beginning inventory + Purchases – Ending Inventory

$  569,818,000 = $ 385,857,000 + Purchases - $ 4,158,058,0000

1178544000 = 1,639,188,000 + Purchase - 372482000

1178544000 – 333183000 + 372482000 = Purchase.

Inventory is an asset. This is because companies invest money there and turn it into profit by selling inventory. Inventory that does not sell as quickly as expected can become a liability. The primary function of inventory is to provide a continuous supply of materials to the farm.

The four most commonly used inventory types are Raw Materials, Work in Process (WIP), Finished Goods, Maintenance, Repair, and Overhaul (MRO). Knowing the nature of your inventory will help you manage your inventory better and smarter. Consider a fashion retailer like Zara, which operates seasonally.

Learn more about inventory at

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