P5-6A Kristen Montana operates a retail clothing operation. She purchases all merchandise inventory

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P5-6A Kristen Montana operates a retail clothing operation. She 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 2005, 2006, 2007, and 2008.

Instructions
(a) Calculate cost of goods sold for each of the 2006, 2007, and 2008 fiscal years.
(b) Calculate the gross profit for each of the 2006, 2007, and 2008 fiscal years.
(c) Calculate the ending balance of accounts payable for each of the 2006, 2007, and 2008 fiscal
years.
(d) Sales declined in fiscal 2008. Does that mean that profitability, as measured by the gross
profit rate, necessarily also declined? Explain, calculating the gross profit rate for each fiscal
year to help support your answer. (Round to one decimal place.)