Lowry 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, 2010, these accounts appeared in its adjusted trial balance. Accounts Payable$ 23,300 Accounts Receivable17,200 Accumulated DepreciationDelivery Equipment20,000 Accumulated DepreciationStore Equipment38,000 Cash8,000 Common Stock35,000 Cost of Goods Sold633,300 Delivery Expense6,200 Delivery Equipment57,000 Depreciation ExpenseDelivery Equipment4,000 Depreciation ExpenseStore Equipment9,500 Dividends12,000 Gain on Sale of Equipment2,000 Income Tax Expense10,000 Insurance Expense9,000 Interest Expense5,000 Merchandise Inventory26,200 Notes Payable47,500 Prepaid Insurance6,000 Property Tax Expense3,500 Property Taxes Payable3,500 Rent Expense34,000 Retained Earnings14,200 Salaries Expense117,000 Sales904,000 Salaries Payable6,000 Sales Returns and Allowances20,000 Store Equipment105,000 Utilities Expense10,600 Additional data: Notes payable are due in 2014. Hint: Prepare financial statements and calculate profitability ratios. Instructions: (a) Prepare a multiple-step income statement, a retained earnings statement, and a classified balance sheet. (a) Net income$ 43,900 Tot. assets$161,400 (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 using 20% of net sales. Given the increased incentive, they expect net sales to increase by 15%. As a result, they estimate that gross profit will increase by $37,605 and operating expenses by $62,595. Compute the expected new net income. (Hint: You do not need to prepare an income statement). Then compute the revised profit margin ratio and gross profit rate. Comment on the effect that this plan would have on net income and on the ratios, and evaluate the merit of this proposal.