Sr disclosed the effect of lifo liquidations net of income

Assignment Help Accounting Basics

Reference no: EM13601862

The following table contains data obtained from annual reports of SR, a shoe manufacturer and retailer:
Years ended December 31 (in $thousands)

2008 2009 2010

sales 535,788 569413 592696
cogs (329,172) (349,597) (362,109)
gross profit 206,616 219,816 230,587

LIFO Liquidation $,973 $3,337 $5,890

Required:
a. Compute the gross margin percentage for each year 2008-2010.

b. SR disclosed the effect of LIFO liquidations net of income tax. Assuming a tax rate of 35%, recompute SR's gross margin for the years 2008-2010 after removing the effect of LIFO liquidation. (Hint: This means that COGS presented in template is determined after reflecting the effect of before-tax LIFO liquidation)

c. Explain why the trend in gross margins shown in part b is a better indicator of SR's performance than the reported gross margins in part.

Reference no: EM13601862

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