Question

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 trial balance Accounts Payable Accounts Receivable Accumulated Depreciation-Equipment 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 Advertising Expense Rent Expense Retained Earnings Salaries and Wages Expense Sales Revenue Salaries and Wages Payable Sales Returns and Allowances Utilities Expense $ 31,624 20,296 80.240 9.440 41,300 724,874 7,316 185,260 15,930 14.160 2.360 11,800 10.620 5.900 30,916 51.330 7,080 39.530 40.120 16.756 138,060 1.066.720 7.080 23.600 12.508 PM

Answer 1

a) Revised Net Income $126,142 Workings: As per calculated: Net Sales Less: Net Income Expense $1.043.120 $38.822 $1,004,298 $1,199,588 Revised Net Income: Net Sales [$1,043,120 + $1,043,120 * 15%] Less: Expenses [$1,004,298 + $69.148] Expected Net Income $1,073,446 $126.142 b) Revised profit margin 10.5% Workings: Profit Margin Ratio = (Net Income / Sales) * 100 = ($126,142 / $1.199,588) * 100 10.5% Note: I have only attempted error (red column) figures.