Reference no: EM13852454

1. 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 company's fiscal year on November 30, 2014, these accounts appeared in its adjusted trial balance.

Accounts Payable	$ 34,840
Accounts Receivable	22,360
Accumulated Depreciation-Equipment	88,400
Cash	10,400
Common Stock	45,500
Cost of Goods Sold	798,590
Freight-Out	8,060
Equipment	204,100
Depreciation Expense	17,550
Dividends	15,600
Gain on Disposal of Plant Assets	2,600
Income Tax Expense	13,000
Insurance Expense	11,700
Interest Expense	6,500
Inventory	34,060
Notes Payable	56,550
Prepaid Insurance	7,800
Advertising Expense	43,550
Rent Expense	44,200
Retained Earnings	18,460
Salaries and Wages Expense	152,100
Sales Revenue	1,175,200
Salaries and Wages Payable	7,800
Sales Returns and Allowances	26,000
Utilities Expense	13,780

Additional data: Notes payable are due in 2018.

• Prepare a multiple-step income statement.
• Prepare a retained earnings statement.
• Prepare a classified balance sheet.
• Calculate the profit margin and the gross profit rate.

2. 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 $52,576 and expenses by $76,180. Compute the expected new net income. Then, compute the revised profit margin and gross profit rate. (Ignore income tax effects.)