Kristen Montana operates a retail clothing operation. She purchases all merchandise inventory on credit and uses a periodic inventory system. The accounts payable account is used for recording inventory purchases only; all other current liabilities are accrued in separate accounts. You are provided with the following selected information for the fiscal years 2007, 2008, 2009, and 2010.
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Instructions
(a) Calculate cost of goods sold for each of the 2008, 2009, and 2010 fiscal years.
(b) Calculate the gross profit for each of the 2008, 2009, and 2010 fiscal years.
(c) Calculate the ending balance of accounts payable for each of the 2008, 2009, and 2010 fiscal years.
(d) Sales declined in fiscal 2010. Does that mean that profitability, as measured by the gross profit rate, necessarily also declined? Explain, calculating the gross profit rate for each fiscal year to help support your answer. (Round to one decimalplace)