Letterman Inc. operates a retail operation that purchases and sells 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 liabilities are accrued in separate accounts. You are provided with the following selected information for the fiscal years 2007 through 2010, inclusive.

Instructions

(a) Calculate the missing amounts.

(b) Sales declined over the 3-year fiscal period, 2008–2010. 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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2007 2008 2009 2010 Income Statement Data $ (e) 13,800 $53,300 (a) $45,200 14,300 Sales Cost of goods sold (i) 28,600 Gross profit Operating expenses 38,300 33,800 (f) $ 2,500 34,900 $ (b) $ () Net income Balance Sheet Data $ (c) 3,600 $ (k) (1) $7,200 3,200 $8,100 2,500 Merchandise inventory Accounts payable Additional Information Purchases of merchandise $ (g) (h) $14,200 (d) $13,200 inventory on account Cash payments to suppliers 13,600