Your comparison of the gross margin percent for Jackson Drugs for the years 2013 through 2016 indicates a significant decline. This is shown by the following information:

	2016		2015		2014		2013
Sales (thousands)	$15,325		$14,025		$12,375		$11,400
CGS (thousands)	9,777		8,822		7,759		7,125
Gross margin	$5,548		$5,203		$4,616		$4,275
Percent	36.2		37.1		37.3		37.5

A discussion with Meagan Ackers

the controller, brings to light two possible explanations. She informs you that the industry gross profit percent in the retail drug industry declined fairly steadily for three years, which accounts for part of the decline. A second factor was the declining percent of the total volume resulting from the pharmacy part of the business. The pharmacy sales represent the most profitable portion of the business, yet the competition from discount drugstores prevents it from expanding as fast as the nondrug items such as magazines, candy, and many other items sold. Ackers feels strongly that these two factors are the cause of the decline.

The following additional information is obtained from independent sources and the client's records as a means of investigating the controller's explanations:

							Industry Gross
	Jackson Drugs ($ in thousands)								Profit Percent for
					Drug Cost of		Nondrug Cost		Retailers of Drugs
	Drug Sales		Nondrug Sales		Goods Sold		of Goods Sold		and Related Products
2016	$5,609		$9,716		$3,629		$6,558		33.6
2015	5,582		8,443		3,517		5,699		33.7
2014	5,266		7,109		3,328		4,806		33.8
2013	5,130		6,270		3,237		4,257		33.9

A. Evaluate the explanation provided by Adams. Show calculations to support your conclusions.

B. Which specific aspects of the client's financial statements require intensive investigation in this audit?

Requirement a. Evaluate the explanation provided by Ackers Show calculations to support your conclusions.

First, compute the gross margin percentage for drug sales for 2016 through 2013, then, compute the gross margin percentage for nondrug sales for 2016 through 2013

Drugs
2016		%
2015		%
2014		%
2013		%

Your comparison of the gross margin percent for Jackson Drugs for the years 2013 through 2016 indicates a significant decline. This is shown by the following information:

	2016		2015		2014		2013
Sales (thousands)	$15,325		$14,025		$12,375		$11,400
CGS (thousands)	9,777		8,822		7,759		7,125
Gross margin	$5,548		$5,203		$4,616		$4,275
Percent	36.2		37.1		37.3		37.5

A discussion with Meagan Ackers

the controller, brings to light two possible explanations. She informs you that the industry gross profit percent in the retail drug industry declined fairly steadily for three years, which accounts for part of the decline. A second factor was the declining percent of the total volume resulting from the pharmacy part of the business. The pharmacy sales represent the most profitable portion of the business, yet the competition from discount drugstores prevents it from expanding as fast as the nondrug items such as magazines, candy, and many other items sold. Ackers feels strongly that these two factors are the cause of the decline.

The following additional information is obtained from independent sources and the client's records as a means of investigating the controller's explanations:

							Industry Gross
	Jackson Drugs ($ in thousands)								Profit Percent for
					Drug Cost of		Nondrug Cost		Retailers of Drugs
	Drug Sales		Nondrug Sales		Goods Sold		of Goods Sold		and Related Products
2016	$5,609		$9,716		$3,629		$6,558		33.6
2015	5,582		8,443		3,517		5,699		33.7
2014	5,266		7,109		3,328		4,806		33.8
2013	5,130		6,270		3,237		4,257		33.9

A. Evaluate the explanation provided by Adams. Show calculations to support your conclusions.

B. Which specific aspects of the client's financial statements require intensive investigation in this audit?

Requirement a. Evaluate the explanation provided by Ackers Show calculations to support your conclusions.

First, compute the gross margin percentage for drug sales for 2016 through 2013, then, compute the gross margin percentage for nondrug sales for 2016 through 2013

Drugs
2016		%
2015		%
2014		%
2013		%