The former CEO of Benton Beverages retired and you have been hired in her place. In reviewing the selected financial data shown below, you are puzzled given that industry information clearly shows that the cost of beverages has been on the rise. As you walk about the warehouse area for the first time, you observe that, as pallets of beverages are being moved to the loading dock, empty areas appear behind various rows. You question the forklift driver, who says that the CEO told him always to leave alternating empty rows when stacking pallets. You climb a ladder to get a better view of the inventory layout, gasp, climb down, and determine that an emergency report to the board of directors is required.

Required

Incorporating the elements of critical thinking on the inside front cover, comment.

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Years Ended December 31, 2020 2019 2018 2017 $900,000 $750,000 $690,000 $640,000 Sales 100% 100% 100% 100% Cost of goods sold 459,000 51% 390,000 52% 372,600 54% 352,000 55% Merchandise Inventory Merchandise Inventory Merchandise Inventory Merchandise Inventory 45,000' 330,0002 332,000? 85,000' 73,0001 63,000' 345,000? 396,000? 306,000? 342,0003 312,6002 337,6003 63,0004 48,0004 35,0004 20,0004 63,0005 97,0005 85,0005 73,0005 1. Beginning inventory 2. Purchases during the period 3. Cost of goods sold 4. Year-end adjusting entry 5. Ending Inventory