Dayton Hudson Corporation and Subsidiaries - Page 34

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                                TARGET'S SHRINKAGE METHOD                             
          Target Book                                                                 
          Taxable                     Sales-          Shrinkage Minus    Difference as
          Year        Target          Allocated       Sales-Allocated    Percent of   
          Ending      Book            Taxable Year    Taxable Year       Sales-Allocated
          In          Shrinkage       Shrinkage       Shrinkage          Shrinkage    
          1983       $54,175,800     $48,257,951       $5,917,849           12.26%    
          1984        63,773,400      63,217,484          555,916            0.88%    
          1985        66,205,504      73,483,645       -7,278,141           -9.90%    
          1986        82,227,200      81,441,206          785,994            0.97%    
          1983-      266,381,904     266,400,286          -18,382           -0.01%    
          1986                                                                        
                            RESPONDENT'S METHOD - TARGET DIVISION                     
          Verified                                                                    
          Taxable     Loss            Sales-          Loss Minus         Difference as
          Year        Verified by     Allocated       Sales-Allocated    Percent of   
          Ending      Physical        Taxable Year    Taxable Year       Sales-Allocated
          In          Inventory       Shrinkage       Shrinkage          Shrinkage    
          1983       $41,733,212     $48,257,951      -$6,524,739          -13.52%    
          1984        51,323,565      63,217,484      -11,893,929          -18.81%    
          1985        65,194,206      73,483,645       -8,289,439          -11.28%    
          1986        80,248,800      81,441,206       -1,192,406           -1.46%    
          1983-      238,499,783     266,400,286      -27,630,152          -10.37%    
          1986                                                                        
               Dr. Seago determined that Target's estimates of taxable year           
          shrinkage produced, in the aggregate, a net underestimate in the            
          amount of $18,382 for the taxable years ending in 1983 through              
          1986 when compared to sales-allocated taxable year shrinkage.  He           
          also determined that the maximum error under Target's shrinkage             
          method was 12.26 percent of sales-allocated taxable year                    
          shrinkage.  From that analysis, Dr. Seago concludes that the                
          Divisions' shrinkage methods produced “a reasonably accurate                
          measure of the loss” occasioned by shrinkage factors.  Dr. Seago            
          notes that, in contrast, respondent's method yields a cumulative            
          overstatement of income in the amount of $27,630,152.  Dr. Seago            






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