Problem: Income statements for Eldermon Sales Company follow. Analyze the inventory position at the end of each year as well as the profitability of inventory sales in each year. What conclusions would you make concerning the inventory trend?
2015 2014 2013
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $125,000 $100,000 $75,000
Cost of goods sold:
Beginning inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,000 $25,000 $5,000
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,000 80,000 85,000
$135,000 $105,000 $90,000
Ending inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 30,000 25,000
$ 90,000 $ 75,000 $65,000
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,000 $25,000 $10,000