The vice president of marketing and the director of human resources have developed a proposal whereby the company would compensate the sales force ona 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 $45,296 and expenses by $65,632.Compute the expected new net income. Then, compute the revised profit margin and gross profit rate. (Ignore income tax effects.) Revised net income $4 14,542 Revised profit margin (Round to 1 decimal place, e.g. 15.2%) 1.28 Revised gross profit rate (Round to 1 decimal place, e.g. 15.2%) 30.51
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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Wolford 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, these accounts appeared in its adjusted
| Accounts Payable | $ 30,016 | |
| Accounts Receivable | 19,264 | |
| 76,160 | ||
| Cash | 8,960 | |
| Common Stock | 39,200 | |
| Cost of Goods Sold | 688,016 | |
| Freight-Out | 6,944 | |
| Equipment | 175,840 | |
| Depreciation Expense | 15,120 | |
| Dividends | 13,440 | |
| Gain on Disposal of Plant Assets | 2,240 | |
| Income Tax Expense | 11,200 | |
| Insurance Expense | 10,080 | |
| Interest Expense | 5,600 | |
| Inventory | 29,344 | |
| Notes Payable | 48,720 | |
| Prepaid Insurance | 6,720 | |
| Advertising Expense | 37,520 | |
| Rent Expense | 38,080 | |
| 15,904 | ||
| Salaries and Wages Expense | 131,040 | |
| Sales Revenue | 1,012,480 | |
| Salaries and Wages Payable | 6,720 | |
| Sales Returns and Allowances | 22,400 | |
| Utilities Expense | 11,872 |
Additional data: Notes payable are due in 2021.
Gross profit is the ratio of gross profit over net sales. It is required to measure the gross profit earned on the basis of sales made.
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