Chapter 5, Problem 5.4BP

(a)

To determine

A financial statement is the complete record of financial transactions that take place in a company, at a particular period of time. It provides important financial information like assets, liabilities, revenues and expenses of the company to its internal and external users. It helps them to know the exact financial position of the company.

Profitability ratios are the metrics used to measure the profit generating ability of a company for a specific period of time.

To Prepare: The multi-step income statement, retained earnings statement, and classified balance sheet of P Departmental Store, for the year ended December 31, 2014.

(b)

To determine

The profit margin and gross profit rate of P Departmental Store for 2014.

(c)

To determine

To Calculate: The expected new net income, revised gross profit rate, and profit margin of P Departmental Store for 2014 if net sales are increased 25%, gross profit is increased by $50,500 and expenses are increased by $27,800.