The Forzani Group Ltd. is Canada's largest sporting goods retailer. It operates more than 200 stores across Canada under the names Sport Chek, Sport Mart, and Coast Mountain Sports. The company also franchises stores. Note 2(b) to Forzani's 2009 financial statements is included in Exhibit 7-15. The company reported the following amounts for inventory and cost of sales in its January 31, 2010, and February 1, 2009, financial statements.
Inventory:
2010…………………………..$316,319 thousand
2009…………………………..$291,497 thousand
Cost of sales:
2010…………………………..$864,004 thousand
2006…………………………..$863,239 thousand
Required:
a. Calculate the inventory turnover (by ratio and by days) for The Forzani Group Ltd. for 2010 and 2009, using the inventory value at each year end instead of the average inventory amount. Comment on the results.
b. What do you think is meant by freight and distribution costs in Note 2(b)? Is it appropriate that these costs be included in inventory cost? Explain.
c. If the company purchases a large shipment of sports shoes from a manufacturer and is given a 10% volume discount on the manufacturer's usual selling price, how and when does Forzani record the discount? Explain whether you think this is appropriate.