Sandy Melon operates a clothing retail operation. She purchases all 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 2012, 2013, 2014, and 2015

Instructions
(a) Calculate cost of goods sold for each of the 2013, 2014, and 2015 fiscal years.
(b) Calculate the gross profit for each of the 2013, 2014, and 2015 fiscal years.
(c) Calculate the ending balance of accounts payable for each of the 2013, 2014, and 2015 fiscal years.
(d) The vice presidents of sales, marketing, production, and finance are discussing the company’s results with the CEO. They note that sales declined in fiscal 2015. They wonder whether that means 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 youranswer.

Transcribed Image Text:

2012 2013 2014 2015 Inventory (ending) Accounts payable (ending) Sales revenue Purchases of inventory on account Cash payments to suppliers $16,000 $11,300 16,400 14,200 17,000 229,700 227,600 220,000 146,900 155,700 139,200 135,900 159,000 127,000