Fryers Electronics reported the information shown below.

Required
1. Is Fryers Electronics a merchandising entity, a service business, or both? How can you tell? List the items in Fryers Electronics' financial statements that influence your answer.
2. Compute Fryers Electronics' gross margin for fiscal years 2014 and 2013. Did the gross margin increase or decrease in 2014? Is this a good sign or a bad sign about the company?
3. Write a brief memo to the owner advising her of Fryers Electronics' trend of sales, gross margin, and net income. Indicate whether the outlook for Fryers Electronics is favourable or unfavourable, based on this trend. Use the following memo format:
DATE:
TO: The Owner
FROM: (Student Name)
SUBJECT: Trend of sales, gross margin, and net income for Fryers Electronics

FRYERS ELECTRONICS Income Statement (Dollars in thousands) Fiscal Year Ended January 31, 2014 January 31, 2013 Net sales $10,000 $9,550 Costs and expenses: Cost of goods sold Selling, advertising, general, and administrative 7,300 7,030 1,830 1,710 Amortization 186 173 Other expenses Interest expense Other income (expenses) 54 355 90 94 (17) 9,443 $ 557 (17) 9,345 $ 205 Net earnings FRYERS ELECTRONICS Balance Sheet (partial) (Dollars in thousands) Fiscal Year Ended January 31, 2014 January 31, 2013 Assets Current assets: Cash $ 690 $ 185 Accounts and other receivables 130 208 Inventory Prepaid expenses and other current assets 1,990 1,800 40 80 $2,273 Total current assets $2,850