Posted: February 5th, 2019
P5-7A – Alana Inc. – Full Solution with details
P5-7A – Alana Inc.
Alana Inc. operates a retail operation that purchases and sales
home entertainment 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 liabilites
are accrued in seperate accounts. You are provided with the following
selected information for the fiscal year 2011 through 2014, inclusive.
Alana Inc.
2011
2012
2013
2014
Income
statement data
Sales revenue
$55,000
â¬
$47,000
Cost of goods
sold
(a)
$13,800
$14,300
Gross Profit
$38,300
$35,200
(i)
Operating
Expense
$34,900
(f)
$28,600
Net Income
(b)
$2,500
(j)
Balance Sheet
Data
2011
2012
2013
2014
Inventory
$7,200
©
$8,100
(k)
Accounts
Payable
$3,200
$3,600
$2,500
(l)
Additional
Information
Purchase of Merchandise inventory on account
$14,200
(g)
$13,200
Cash Payment
to Suppliers
(d)
(h)
$13,600
(a)
Calculate the missing amount
(b)
Sales declined over the 3 year fiscal period, 2012 – 2014. Does that mean
that profitabilty necessarially also declined? Explain, computing the gross
profit rate and the profit margin for each fiscal year to help support your
answer.
