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method. Superx determined the booking rate by calculating a
company key rate from cost price data obtained from 80 selected
stores. The booking rate represented the percentage of each
dollar of sales that represented gross profit. Gross income was
further reduced by shrinkage accrual.
Cost of sales was computed by multiplying sales by the
percentage equal to (1) 100 percent less (2) the applicable
booking rate. That amount was used to reduce inventory.
2. LIFO
For its 1984 and 1985 years, Superx used the dollar value
LIFO method of calculating its inventories, using five LIFO
pools. It excluded optical centers, deli, restaurants, liquor,
and inventories maintained by Florida Choice from its LIFO
method. It discontinued the LIFO method for its 1986 tax year.
3. Shrinkage Accruals
Superx made shrinkage accruals for all of its departments
except its optical departments. Superx developed a single
shrinkage accrual rate, which was expressed as a percentage of
gross sales and used by all of Superx’s drug stores (and applied
uniformly, although yielding different shrinkage accruals
depending on a store’s sales).
Superx’s shrinkage accrual rate was determined at Superx
headquarters. Superx management primarily examined historical
shrinkage experience and recent shrinkage trends at the company
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