MacLean Corp. purchases all merchandise inventory on credit and uses a perpetual inventory system. The Accounts Payable account is used for recording merchandise inventory purchases only; all other current liabilities are accrued in separate accounts.
You are provided with the following selected information for the most recent three years:
Instructions
(a) Calculate the missing amounts for items [1] through [10]. You will find it helpful to prepare summary journal entries and T accounts for Merchandise Inventory and Accounts Payable to solve for items 3, 4, 7, and 8.
(b) Calculate the gross profit margin and profit margin for each year.
(c) Sales increased over the three-year period. Does this mean that profitability should also have increased in the same period? Refer to the gross profit margin and profit margin to explain and support your answer.
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