Chapman Department Store is located in midtown

Metropolis Durin
Chapman Department Store is located in midtown Metropolis. During the past several years, net
income has been declining because suburban shopping centers have been attracting business
away from city areas. At the end of the company’s fiscal year on November 30, 2012, these
accounts appeared in its adjusted trial balance.Accounts Payable .......... $ 26,800Accounts
Receivable ......... 17,200Accumulated Depreciation-Equipment ... 68,000Cash .................
8,000Common Stock ............ 35,000Cost of Goods Sold ......... 614,300Freight-out ...............
6,200Equipment ............. $157,000Depreciation Expense ........... 13,500Dividends ..............
12,000Gain on Disposal of Plant Assets ...... 2,000Income Tax Expense ..........
10,000Insurance Expense .......... 9,000Interest Expense ........... 5,000Inventory ..............
26,200Notes Payable ............ 43,500Prepaid Insurance ........... 6,000Advertising Expense
.......... 33,500Rent Expense ............. 34,000Retained Earnings ............ 14,200Salaries and
Wages Expense ...... 117,000Sales Revenue ........... 904,000Salaries and Wages Payable ........
6,000Sales Returns and Allowances ..... 20,000Utilities Expense ........... 10,600Additional data:
Notes payable are due in 2016.Instructions(a) Prepare a multiple-step income statement, a
retained earnings statement, and a classified balance sheet.(b) Calculate the profit margin ratio
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 15%. As a result, they estimate that gross profit will increase by $40,443 and expenses by
$58,600. Compute the expected new net income.View Solution:
Chapman Department Store is located in midtown Metropolis Durin
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