Wal-Mart Stores, Inc. and Subsidiaries - Page 34

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          books and records reflected the amount of inventory on hand as              
          verified by the count.                                                      
                A comparison of the total annual shrinkage recorded in                
          petitioners' books (booked shrinkage) to the total shrinkage                
          verified by actual count (verified shrinkage) during each of the            
          years demonstrates that petitioners' method of estimation was               
          reasonable.  The following table compares booked shrinkage as a             
          percentage of sales for the annual accounting period to verified            
          shrinkage as a percentage of sales for the period between the               
          physical inventory and the immediately preceding physical                   
          inventory.                                                                  
                         Shrinkage as a Percentage of Sales                          
                Year           Booked               Verified                          
                1983           1.47                 1.48                              
                1984           1.11                 1.06                              
                1985           1.36                 1.37                              
                1986           1.00                 1.00                              
          Although this comparison matches shrinkage for the physical                 
          inventory cycle to shrinkage for the taxable year, which is a               
          different period, we believe that this comparison is appropriate            
          under the facts herein.  Both periods cover the period from the             
          beginning of the taxable year to the physical inventory dates,              
          and both amounts of shrinkage relate to sales for the period over           
          which the shrinkage is measured.  Moreover, the combination of              
          the monthly estimates for the period from the beginning of the              
          taxable year to the physical inventory date, taking into account            
          the adjustments made at the time of the physical counts, reflects           



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