Reza Inc. operates a retail operation that purchases and sells snowmobiles, amongst other outdoor products. The company 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 2010 through 2013, inclusive.
| 2010 Don't use plagiarized sources. Get Your Custom Essay on reza inc operates a retail operation that purchases and sells snowmobiles amongst ot 533589 For $10/Page 0nly | 2011 | 2012 | 2013 | |
| Income Statement Data | ||||
| Sales revenue | $96,890 | $ (e) | $82,220 | |
| Cost of goods sold | (a) | 28,060 | 26,490 | |
| Gross profit | 67,800 | 59,620 | (i) | |
| Operating expenses | 63,640 | (f ) | 52,870 | |
| Net income | $ (b) | $ 3,510 | $ ( j) | |
| Balance Sheet Data | ||||
| Inventory | $13,000 | $ (c) | $14,700 | $ (k) |
| Accounts payable | 5,800 | 6,500 | 4,600 | (l) |
| Additional Information | ||||
| Purchases of merchandise | ||||
| inventory on account | $25,890 | $ (g) | $24,050 | |
| Cash payments to suppliers | (d) | (h) | 24,650 |
Instructions
(a) Calculate the missing amounts.
(b) The vice presidents of sales, marketing, production, and finance are discussing the company’s results with the CEO. They note that sales declined over the 3-year fiscal period, 2011–2013. Does that mean that profitability necessarily also declined? Explain, computing the gross profit rate and the profit margin ratio for each fiscal year to help support your answer.
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