Problem 6-10 Novak 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, 2017, its accounting records included the following accounts and adjusted balances. Accounts Payable Accounts Receivable Accumulated Depreciation-Equipment Advertising Expense Cash Common Stock Cost of Goods Sold Freight-Out Equipment Depreciation Expense Dividends Gain on Disposal of Plant Assets Income Tax Expense Insurance Expense Interest Expense Inventory Notes Payable Prepaid Insurance Rent Expense Retained Earnings Salaries and Wages Expense $ 33,768 21,672 85,680 42,210 10,080 44,100 774,018 7,812 197,820 17,010 15,120 2,520 12,600 11,340 6,300 33,012 54,810 7,560 42,840 17,892 147,420 Retained Earnings Salaries and Wages Expense Salaries and Wages Payable Sales Returns and Allowances Sales Revenue Utilities Expense 17,892 147,420 7,560 25,200 1,139,040 13,356 Additional data: Notes payable are due in 2021 Prepare a multiple-step income statement. (List other revenues before other expenses. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) NOVAK DEPARTMENT STORE Income Statement For the Year Ended November 30, 2017 Sales Sales Revenue Less . Sales Returns and Allowances Net Sales Cost of Goods Sold Gross Profit Gross Profit Operating Expenses Advertising Expense Freight-Out Depreciation Expense Utilities Expense Salaries and Wages Expense Rent Expense Insurance Expense Total Operating Expenses Income From Operations Other Revenues and Gains Gain on Disposal of Plant Assets Other Expenses and Losses Interest Expense Interest Expense Income Before Income Taxes Income Tax Expense Net Income/(Loss) Prepare a retained earnings statement. (List items that increase retained earnings first.) O DEPARTMENT STORI Retained Earnings Statement For the Year Ended November 30, 20174 Retained Earnings, December 1, 2016 Add: Net Income/(Loss) Less. Dividends Retained Earnings, November 30, 2017 Prepare a classified balance sheet. (List current assets in order of liquidity.) NOVAK DEPARTMENT STORE Balance Sheet Assets Calculate the profit margin and the gross profit rate. (Round answers to 1 decimal place, e.g. 15.2%) Profit margin Gross profit rate 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 $50,958 and expenses by $73,836. Compute the expected new net income. (Hint: You do not need to prepare an income statement.) Then, compute the revised profit margin and gross profit rate. (Ignore income tax effects.) (Round Revised profit margin and Revised gross profit rate to 1 decimal place, e.g. 15.2%) Revised net income Revised profit margin Revised gross profit rate Click if you would like to Show Work for this question: Open Show Work