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	$26,800
Accounts Receivable	17,200
Accumulated DepreciationEquipment	68,000
Cash	8,000
Common Stock	35,000
Cost of Goods Sold	614,300
Freight-Out	6,200
Equipment	157,000
Depreciation Expense	13,500
Dividends	12,000
Gain on Disposal of Plant Assets	2,000
Income Tax Expense	10,000
Insurance Expense	9,000
Interest Expense	5,000
Inventory	26,200
Notes Payable	43,500
Prepaid Insurance	6,000
Advertising Expense	33,500
Rent Expense	34,000
Retained Earnings	14,200
Salaries and Wages Expense	117,000
Sales Revenue	904,000
Salaries and Wages Payable	6,000
Sales Returns and Allowances	20,000
Utilities Expense	10,600

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
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2011Retained Earnings, November 30, 2012SalesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes
	$
AddLess:
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2011Retained Earnings, November 30, 2012SalesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2011Retained Earnings, November 30, 2012SalesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2011Retained Earnings, November 30, 2012SalesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes
	$
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2011Retained Earnings, November 30, 2012SalesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2011Retained Earnings, November 30, 2012SalesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2011Retained Earnings, November 30, 2012SalesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2011Retained Earnings, November 30, 2012SalesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2011Retained Earnings, November 30, 2012SalesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2011Retained Earnings, November 30, 2012SalesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes	$

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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
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2013Retained Earnings, November 30, 2014Sales RevenuesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes	$
AddLess: DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2013Retained Earnings, November 30, 2014Sales RevenuesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes
AddLess: DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2013Retained Earnings, November 30, 2014Sales RevenuesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes
DividendsExpensesNet Income / (Loss)Retained Earnings, December 1, 2013Retained Earnings, November 30, 2014Sales RevenuesTotal ExpensesTotal RevenuesNet SalesGross ProfitOperating ExpensesTotal Operating ExpensesIncome From OperationsOther Revenues and GainsOther Expenses and LossesIncome Before Income Taxes	$

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Prepare a classified balance sheet.(List current assets in order of liquidity.)

LAMBERT DEPARTMENT STORE Balance Sheet November 30, 2014
Assets
Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity
	$
Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity		$
Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity
AddLess:
Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity			$
Liabilities and Stockholders' Equity
Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity
	$
Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity		$
Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity
Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity
Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity
Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity
Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity			$

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Calculate the profit margin and the gross profit rate.(Round answers to 1 decimal place, e.g. 15.2%)

Profit margin		%
Gross profit rate		%

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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 by15%. As a result, they estimate that gross profit will increase by $40,443and expenses by $58,600. 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%)		%