Question

Problem 5-8A Sage Hill Inc. operates a retail operation that purchases and sells snowmobiles, among other outdoor products. The company purchases all 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 2015 through 2018, inclusive

Calculate the missing amounts. 2015 2016 2017 2018 Income Statement Data Sales revenue $127,895   $enter a dollar amount (e) $108,530   Cost of goods sold enter a dollar amount (a) 37,039   34,967   Gross profit 89,496   78,698   enter a dollar amount (i) Operating expenses 84,005   enter a dollar amount (f) 69,788   Net income $enter a total net income (b) $ 4,633   $enter a total net income (j) Balance Sheet Data Inventory $17,160   $enter a dollar amount (c) $19,404   $enter a dollar amount (k) Accounts payable 7,656   8,580   6,072   enter a dollar amount (l) Additional Information Purchases of inventory on account 34,175   $enter a dollar amount (g) $31,746   Cash payments to suppliers enter a dollar amount (d) enter a dollar amount (h) 32,538

Compute the gross profit rate and the profit margin for each fiscal year. 2016 2017 2018 Gross profit rate (Round to 2 decimal places, e.g. 15.50%.) enter percentages rounded to 2 decimal places % enter percentages rounded to 2 decimal places % enter percentages rounded to 2 decimal places % Profit margin (Round to 2 decimal places, e.g. 15.30%.) enter percentages rounded to 2 decimal places % enter percentages rounded to 2 decimal places % enter percentages rounded to 2 decimal places %

Answer 1

• Requirements asked

		2015	2016	2017	2018
Income Statement Data
Sales revenue			$127,895	$115,737	$108,530
Cost of goods sold			$38,399	$37,039	$34,967
Gross profit			$89,496	$78,698	$73,563
Operating expenses			$84,005	$74,065	$69,788
Net income			$5,491	$4,633	$3,775
Balance Sheet Data
Inventory		$17,160	$12,936	$19,404	$16,183
Accounts payable		$7,656	$8,580	$6,072	$5,280
Additional Information
Purchases of inventory on account			$34,175	$43,507	$31,746
Cash payments to suppliers			$33,251	$46,015	$32,538

--Working

		2015	2016	2017	2018
Income Statement Data
Sales revenue			127895	=37039+78698	108530
Cost of goods sold			=127895-89496	37039	34967
Gross profit			89496	78698	=108530-34967
Operating expenses			84005	=78698-4633	69788
Net income			=89496-84005	4633	=73563-69788
Balance Sheet Data
Inventory		17160	=17160+34175-38399	19404	=19404+31746-34967
Accounts payable		7656	8580	6072	=6072+31746-32538
Additional Information
Purchases of inventory on account			34175	=19404+37039-12936	31746
Cash payments to suppliers			=7656+34175-8580	=8580+43507-6072	32538

• [2]

		2016	2017	2018
[Gross Profit/Sales Revenue] x 100	Gross Profit rate	69.98%	68.00%	67.78%
[Net Income/ Sales Revenue] x 100	Profit Margin	4.29%	4.00%	3.48%