Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 65

Inferring Shrinkage Using a Perpetual Inventory System
JCPenney Company, Inc., is a major retailer with department stores in 49 states and Puerto Rico. The main part of the company's business consists of providing merchandise and services to consumers through department stores. In 2010, JCPenney reported cost of goods sold of $10,799 million, ending inventory for the current year of $3,213 million, and ending inventory for the previous year (2009) of $3,024 million.
Required:
If you knew that the cost of inventory purchases was $11,289 million, could you estimate the cost of shrinkage during the year If so, prepare the estimate and, if not, explain why.