Question: Inferring Shrinkage Using a Perpetual Inventory System JC Penney Company, Inc., is a major retailer with department stores in all 50 states. The main part of the company's business consists of providing merchandise and services to consumers through department stores. In 2006 JC Penney reported cost of goods sold of $11,405 million, ending inventory for the current year of $3,234 million, and ending inventory for the previous year (2005) of $3,167 million.
Required: If you knew that the cost of inventory purchases was $11,474 million, could you estimate the cost of shrinkage during the year? If so, prepare the estimate and, if not, explain why.