Problem 5-4A Lambert 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 companys fiscal year on November 30, 2014, these accounts appeared in its adjusted trial balance. Accounts Payable $ 36,716 Accounts Receivable 23,564 Accumulated DepreciationEquipment 93,160 Cash 10,960 Common Stock 47,950 Cost of Goods Sold 841,591 Freight-Out 8,494 Equipment 215,090 Depreciation Expense 18,495 Dividends 16,440 Gain on Disposal of Plant Assets 2,740 Income Tax Expense 13,700 Insurance Expense 12,330 Interest Expense 6,850 Inventory 35,894 Notes Payable 59,595 Prepaid Insurance 8,220 Advertising Expense 45,895 Rent Expense 46,580 Retained Earnings 19,454 Salaries and Wages Expense 160,290 Sales Revenue 1,238,480 Salaries and Wages Payable 8,220 Sales Returns and Allowances 27,400 Utilities Expense 14,522 Additional data: Notes payable are due in 2018. Prepare a multiple-step income statement. (List other revenues before other expenses.)

LAMBERT DEPARTMENT STORE Income Statement For the Year Ended November 30, 2014 Sales Revenue $ 1,238.480 : Sales Returns and Allowances 27,400 1,211,080 Cost of Goods Sold 841,591 369,489 Freight-Out $ -8,494 Advertising Expense -45,895 Salaries and Wages Expense -160,290 Utilities Expense -14,522 Depreciation Expense -18,495 Insurance Expense -12,330 Rent Expense -46,580 62,883 Dividends 16,440 Gain on Disposal of Plant Assets 2,740 Interest Expense 12,330 $ 75,231

Prepare a retained earnings statement. (List items that increase retained earnings first.) LAMBERT DEPARTMENT STORE Retained Earnings Statement For the Year Ended November 30, 2014 $ : : $ SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare a classified balance sheet. (List current assets in order of liquidity.) LAMBERT DEPARTMENT STORE Balance Sheet November 30, 2014 Assets $ $ : $ Liabilities and Stockholders' Equity $ $ $ SHOW LIST OF ACCOUNTS LINK TO TEXT 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 $55,407 and expenses by $80,282. Compute the expected new net income.

Then, compute the revised profit margin and gross profit rate. (Ignore income tax effects.) Revised net income $ Revised profit margin (Round to 1 decimal place, e.g. 15.2%) % Revised gross profit rate (Round to 1 decimal place, e.g. 15.2%)