High Liner Foods Incorporated, which is headquartered in Lunenburg, Nova Scotia, operates in the North American packaged foods industry. The company’s brands include High Liner, Fisher Boy, FPI, Sea Cuisine, Mirabel, Catch of the Day, and Royal Sea. The company also manufactures products for private labels. The information in Exhibits 7.26B to 7.26C was taken from the company’s 2020 annual report.

Required 

a. Note 7 breaks down High Liner’s inventory into two classifications. Which classifications of inventory do you believe should be used in determining the inventory turnover ratio? Why? 

b. Describe High Liner’s inventory valuation policies in your own words. Specifically, explain what High Liner includes in inventory cost, what cost formula(s) the company uses, and how it values its inventory on the statement of financial position. 

c. Does High Liner use the same cost formula for all of its inventories? If not, explain what methods are used for which inventories and why this might be the case. 

d. Calculate the inventory turnover ratio and days to sell inventory ratio for both periods. Use the year- end inventory balances instead of the average inventory amounts.

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HIGH LINER FOODS INCORPORATED Consolidated Statements of Income (in thousands of United States dollars, except per share amounts) Sales Cost of sales Gross profit Distribution expenses Selling, general and administrative expenses Impairment of property, plant and equipment Business acquisition, integration and other expenses Results from operating activities Finance costs Income before income taxes Income taxes Current Deferred Income tax expense Net income Notes 24 00 8 28 18 18 18 Fifty-three weeks ended January 2, 2021 $827,453 649,529 177,924 45,076 73,736 2,957 56,155 19,483 36,672 6,535 1,335 7,870 $ 28,802 Fifty-two weeks ended December 28, 2019(¹) $942,224 756,364 185,860 45,759 90,019 974 1,572 47,536 33,012 14,524 3,356 879 4,235 $ 10,289