The Inventories Disclosure Note in the 2014 Financial Statements for SUPERVALU

question 128

Essay

The inventories disclosure note in the 2014 financial statements for SUPERVALU Inc., one of the largest grocery chains in the United States, included the following:

"During fiscal 2014, 2013 and 2012, inventory quantities in certain LIFO layers were reduced. These reductions resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of fiscal 2014, 2013 and 2012 purchases. As a result, Cost of sales decreased by $14, $6 and $9 in fiscal 2014, 2013 and 2012, respectively. All inventories are stated at the lower of cost or current market values. Cost for inventories at the majority of our operations is determined on a last-in, first-out ("LIFO") basis."

-The disclosure note indicates an inventory liquidation during 2014, 2013, and 2012. By how much did net income in 2014 increase due to the liquidation? Assume an income tax of 40%.

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Definitions:

Purchase Decisions

The process consumers go through to select, purchase, and use goods or services, influenced by psychological, social, and economic factors.

Firm's Products

The goods or services that a company offers to its customers as part of its business operations.

Reminder Advertising

A marketing strategy aimed at keeping a brand or product in the minds of consumers.

Doing Business

Engaging in activities that generate revenue or provide services in exchange for monetary compensation.