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Homework answers / question archive / For 2016, Walmart shows an adjustment for inventories of negative $703 million
For 2016, Walmart shows an adjustment for inventories of negative $703 million. However, on the balance sheet, inventories declined from $45,141 million to 44,469 million, a difference of $672 million. Explain the $703 million adjustment and offer examples of why the adjustment differs from the change in inventory balance.
Estimate the amount of cash received from customers in 2016.
The change in inventory ($672 million) does not match the amount of the write-off adjustment ($703 million), because Walmart must have purchased more additional inventory than it sold during the year. The ending inventory (EI) balance is computed as follows:
EI = BI + Purchases - Inventory Sold - Write-off Adjustments
Regarding the cash received from customers, there is not enough information provided to provide an estimate. That said, cash flow from customers will be reflective of the following formula:
Customer Cash Receipts = Sales - Ending Accounts Receivable + Beginning Accounts Receivable
