What does Home Depot’s 2015 Form 10-K communicate about its inventory?

Photo of Home Depot store

Source: Wendy Tietz, 9/22/2015

Home Depot (HD) is a retailer of home improvement and construction products. Home Depot is currently the world’s largest home improvement retailer with revenues exceeding $83 billion in its fiscal year ending February 1, 2015.

The most commonly used inventory valuation methods are first-in first-out, last-in first-out, and average or weighted average cost. See the excerpts to follow from Home Depot’s 2015 Form 10-K: its Consolidated Balance Sheets 2015 Excerpt and a section from its Notes to Financial Statements (page 35 – 36).

Questions

  1. Which method does Home Depot use to value its inventory?
  2. What is shrink and how can a company prevent it?
  3. What is the main difference between the FIFO, LIFO, and weighted average cost inventory valuation methods?
  4. What benefits would using the FIFO method for inventory valuation provide for Home Depot?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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