Question

Case Question 12-22 Pippin Piping Co. manufactures decorative fabric trims. The company's financial statements follow Pippin Piping Co. 2016 2015 2014 Sales revenue Cost of goods sold Gross margin Operating expenses Operating income Other revenue Interest expense $576,600 $523,000 $484,200 291,000 259,200 234,300 285,600 263,800 249,900 106,200 104,600 104,100 179,400 159,200 145,800 22,500 15,900 23,900 11,200 10.500 11,900 Income before income tax 190,700 164,600 157,800 Income tax expense (40%) 76,280 65,840 63,120 $114,420 $98,760 $94,680 Net income Pippin Piping Co. Comparative Balance Sheets As of December 31 Assets 2014 32,000 $25,800 $20,500 126,860 127,000 94,300 60,000 80,700 56,000 4,600 229,860 243,500 175,400 668,900 576,000 540,300 $898,760 $819,500 $715,700 2016 2015 Cash Accounts receivable (net) Inventory Prepaid expenses 11,000 10,000 Total current assets Property & equipment (net) Total Assets Liabilities and Stockholders Equity Accounts payable Accrued expenses $53,120 $81200 79,100 11,000 12,240 41,700 3.440 120,800 170,000 160,000 50,000 234,120 253.440 270,800 64.120 93.4 Total current liabilities Long-term deb Total iabilities Stockholders Equity 6,000 6,000 5,000 99,000 99,000 62,000 559,640 461,060 377,900 664,640 566,060 444,900 Total Liabilities and Stockholders' Equity $898,760 $819,500 $715,700 Common stock, $0.50 par value Additional paid-in capital Retained earnings Total stockholders' equity Additional information Closing stock price Shares outstanding Dividends paid per share $1.32 $1.30 $1.2 2016 2015 2014 $30 12,000 12,000 10,000 38 35

Answer 1

Pippin Piping Co
Income statement
Common size
	2016	2015	2014
Sales	100.0%	100.0%	100.0%
Cost of goods sold	50.5%	49.6%	48.4%
Gross Margin	49.5%	50.4%	51.6%
Operating expense	18.4%	20.0%	21.5%
Operating income	31.1%	30.4%	30.1%
Other revenues	3.9%	3.0%	4.9%
Interest expenses	1.9%	2.0%	2.5%
Income before income taxes	33.1%	31.5%	32.6%
Income tax expense	13.2%	12.6%	13.0%
Net income	19.8%	18.9%	19.6%

Pippin Piping Co
Balance sheet
Common size
Assets	2016	2015	2014
Cash	3.6%	3.1%	2.9%
Accounts receivables	14.1%	15.5%	13.2%
Inventory	6.7%	9.8%	7.8%
Prepaid expenses	1.2%	1.2%	0.6%
Total Current assets	25.6%	29.7%	24.5%
property plant and equipment	74.4%	70.3%	75.5%
Total Assets	100.0%	100.0%	100.0%
Liabilities and stockholder's equity
Accounts payable	5.9%	9.9%	11.1%
Accrues expenses	1.2%	1.5%	5.8%
Total Current liabilities	7.1%	11.4%	16.9%
Long term debts	18.9%	19.5%	21.0%
Total liabilities	26.0%	30.9%	37.8%
Stockholder’s equity
Common stock	0.7%	0.7%	0.7%
Additional; paid in capital	11.0%	12.1%	8.7%
Retained earnings	62.3%	56.3%	52.8%
Total Stockholder’s equity	74.0%	69.1%	62.2%
Total Liabilities and stockholder's equity	100.0%	100.0%	100.0%