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During the years in issue, Florida Choice followed the same
KFS division accounting methods and procedures utilized by the
KMAs. Florida Choice followed the shrinkage accrual practices
and procedures applicable to the KFS division to determine its
shrinkage accrual rate as if it were a KMA.
During 1984, Florida Choice conducted an average of three
physical inventories a store. In 1985 and 1986, the average was
two inventories a store.
IV. Superx
A. General Operations
During the years in issue, Superx operated between 185 and
621 drug and general merchandise stores.
Superx had its own management organization. Superx’s
management reported to corporate management in the Kroger general
office. The Kroger general office set the policies that governed
the general operations of Superx.
B. Accounting Methods and Procedures
1. Booking Rate Calculations
Inventory was reflected on Superx’s inventory accounts at
cost and not at retail.
To calculate gross income of each store (and each department
within a store) for the physical-to-yearend period, Superx
multiplied sales during that period by a percentage known as the
“booking rate”. That process was similar to Kroger’s retail
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