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Parker Department Store is located near the Mark Twain Shopping Mall. At the end of the company’s fiscal year on December 31, 2014, the following accounts appeared in its adjusted trial balance.Accounts Payable …………. $ 73,300Accounts Receivable……….. 43,500Accumulated Depreciation—Buildings…. 52,500Accumulated Depreciation—Equipment…. 42,600Buildings……………. 140,000Cash……………… 30,000Common Stock………….. 140,000Cost of Goods Sold………… 412,000Depreciation Expense………… 23,400Dividends……………. 15,000Equipment…………… 100,000Gain on Disposal of Plant Assets…… 4,300Income Tax Expense……….. 15,000Insurance Expense …………. 8,400Interest Expense…………. 7,000Interest Payable…………. 2,000Inventory……………. 43,000Land……………… 50,000Mortgage Payable…………. 62,500Prepaid Insurance………….. 2,400Maintenance and Repairs Expense…… 6,200Retained Earnings…………. 19,200Salaries and Wages Expense……… 111,000Sales Revenue…………… 626,000Salaries and Wages Payable………. 3,500Sales Returns and Allowances……… 8,000Utilities Expense………….. 11,000Additional data: $20,000 of the mortgage payable is due for payment next year.Instructions(a) Prepare a multiple-step income statement, a retained earnings statement, and a classified balance sheet.(b) Calculate the profit margin and the gross profit rate.(c) The vice president of marketing and the director of human resources have developed a proposal whereby the company would compensate the sales force on a strictly commission basis. Given the increased incentive, they expect net sales to increase by 25%. As a result, they estimate that gross profit will increase by $50,500 and expenses by $27,800. Compute the expected new net income. Then, compute the revised profit margin and gross profit rate. Comment on the effect that this plan would have on net income and the ratios, and evaluate the merit of this proposal.View Solution:
Parker Department Store is located near the Mark Twain Shopping

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