Obsolete Inventory Analysis

• In 1993 cost of goods sold being 90% of sales and 9.6% gross profit of sales. Company’s lack of ability to manage inventory and lack of cash forced them to order from more expensive (12-15%more) warehouse than steel mills.

As focusing on each of the five management assertions for the inventory account, we discovered that there are some risky areas that indicate the need for further attention during the audit. First of all, for existence or occurrence, all items in the inventory account must physically exist and be available for sale. Thus, the auditors should physically count finished goods, copper rod, and plastic inventories, and determine actual increase of inventories at year end. Also, they should select items from the inventory ledger and locate them and reconcile the quantity. Second, for completeness, the auditors should make sure that all existing inventories have been recorded completely , go around the warehouse and ensure all the inventories are recorded in the inventory ledger. Third, for valuation or allocation, the auditors should make sure that Laramie Wire manufacturing sticks with one valuation method(For inventory items, valuation is based on the lower of cost or market value, with several alternative methods for calculating cost), find out if there is any scrap inventory that needs to be recorded and written off ,and ask about obsolescence items. Fourth, for rights and obligations, the auditor should ask them if there is any consigned inventory at their warehouse. If there is, those inventories should not be recorded in the company's inventory ledger. Finally, for presentation and disclosure, the auditors should review the company's financial

The process requires Peyton Approved to discover how much inventory is sold and what the cost of goods will result in. The process requires the business to review three forms of merchandise inventory to determine which summary benefits the business’s operational behavior. One will discover when assuming that first inventory purchased by the store is the first to be sold, it is determined that the FIFO method displays the best financial outcome for the business. During the process of updating journal entries, one must enter the information proved appropriately into the T-accounts to add the balance under each record. Once the T-accounts for transactions and adjusted transactions are balanced, the next step is to enter the information provided on the balance sheet. The balance sheet will list Peyton Approved assets, liabilities and stockholders equity after added during the T-account process (Nobles, 2014). Once the balance sheet is completed the income statement, statement of retained earnings, and closing entries can be filled with the information proved. This will give the business a full review from journal entry to closing entries of the business for the six month accounting

purposes. Its beginning inventory for the current year was $8,000,000. Its ending inventory for the current year

When calculating the percentage change in inventories, an issue arises when using either the lower cost of market or the market value. When looking at the calculations for finished goods inventory (insulated wire) and copper rod inventory Laramie has applied the lower cost of market. However, the calculation pertaining to plastics inventory reveals that the market value should be used for classification, but Laramie has used cost. The percentage change of the plastics inventory if the $.12 per pound is used is a 27% decrease. The importance of classifying inventory correctly

It seems that the company late in the year could have adjusted their approach to spend more in advertising in order to make up for the lag in net sales, this reaction to a decrease in sales is likely and could have helped get the company up to 3400 units sold for the year if they noticed a decrease in anticipated sales earlier in the year. Competition Bikes should have increased their budget for total advertising expenses in year nine to appeal more to the individual buys rather than the corporate sponsors in order to meet their sales goals. Transportation out was over budget by 2%, as with advertising expenses, anything over budget results in a loss of gross revenue for Competition Bikes. With a 3% decrease in total sales, there should have also been a 3% decrease in transportation out expenses as transportation out is a fixed delivery expense. Reasons for this unfavorable expense could be that Competition Bikes offered expedited delivery on certain order to promote sales or there may have been an increase in cost enforced by the company's freight provider for delivery services.

During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company’s

Tim Horton's one of North America's largest coffee and fresh baked goods chains. Today, Tim Horton's has more than 2,200 stores across Canada and a steadily growing base of 160 locations in key markets within the United States. Our project is focus on the Inventory management of Tim Horton's which located in Bay Shore, 2970 Carling Ave. Inventory Management is the practice of planning, directing and controlling inventory so that it contributes to the business' profitability. Inventory management can help business be more profitable by lowering their cost of goods sold and/or by increasing sales.

Despite Vonkel’s desire for expansion and growth, Thembeka have experienced an overall profit loss for the past five years. An initial investigation into the company’s finances reveal that there is an overall business turnover of about $63 million (USD), and the cost of inventory alone is $27 million USD. Over 80 percent of the company’s total inventory consists of finished product. Inventory is inconsistently categorized, which also leads to a longer lead time for the organization to fulfill orders. Most of the inventory is held in various retail outlets that Thembeka own, and in franchises where Thembeka own the stock.

Shippers Ltd. had the following inventory situations to consider at January 31, its year end:

In the early 1980 the consumer electronics industry was growing at an explosive pace. Between the 1981 and 1984 the total sales for the industry doubled. To support increasing sales massive amounts of inventory has to be procured, marked up and sold to consumers. Inventory becomes the biggest asset a retailer has. As part of the audit planning processes the inspection of the inventory system and verification of the actual inventory numbers should have been a priority. Crazy Eddie was able to inflate its financial results by fraudulently altering its inventory counts and was able to conceal these activities from the auditors for several years.

Second, the classification in inventory management is still inaccurate. That results in some problems such as: the severe lack of some products which are in growing demand (1 inch valve series 230), the redundancy making storage expenses go up and the stagnancy in storage area (to products like gear driven rotary and monitor controller)

With this company the inventory management ratios further indicate that there may be an issue with inventory and inventory controls. The inventory turnover ratio is lower than the industry average and the days’ sales in inventory are high. A company wants to turn inventory quickly to reduce storage costs, and

This measures the adequacy of the company’s working capital position and is as important as measuring the company’s ability to manage its two important assets, inventory and accounts receivable, efficiently.

Management of a company would probably be most interested in viewing the Operating Activities section of the Statement of Cash Flows. This section pinpoints the exact inventories, liabilities, depreciation and receivables of the company during a certain time period. So managers are able to see what operations are occurring, what type of inventory is on hand and what the assets and liabilities of the company are.