Reading and Interpreting Walgreen Co.\'s Inventory Note Walgreen Co.’s 2012 Form

Question

Reading and Interpreting Walgreen Co.'s Inventory Note

Walgreen Co.’s 2012 Form 10-K includes the following in the note that summarizes its accounting policies:

Inventories

Inventories are valued on a lower of last-in, first-out (LIFO) cost or market basis. At August 31, 2012 and 2011, inventories would have been greater by $1,897 million and $1,587 million, respectively, if they had been valued on a lower of first-in, first-out (FIFO) cost or market basis. As a result of declining inventory levels, the fiscal 2012 LIFO provision was reduced by $268 million of LIFO liquidation. Inventory includes product costs, inbound freight, warehousing costs and vendor allowances not classified as a reduction of advertising expense.

NOTE: For 2011, 1587 was marked correct & for 2012 I've already tried the answer of 1629 by subtracting 1897 from 268 & it was marked incorrect, I'm not sure what I'm missing.

1. What is the amount of the LIFO reserve at the end of each of the two years? Enter your answers in millions.

2012: $_____million

2011: $_____million

Explanation / Answer

The Answer:

2012 - $1897 and 2011 - $1587

No adjustment would be required as the figure of 1897 should have been arrived after considering the LIFO liquidation. These figures can be confirmed from the published figures of 2015 under note 'adjustment to inventory LIFO to FIFO, which gives the LIFO reserve as 1897 and 1587.

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