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 93.440 120,800 170,000 160,000 50,000 234,120 253,440 270,800 Total current liabilities 64,120 Long-term debt Total labilities 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 2016 2015 2014 Closing stock price Shares outstanding Dividends paid per share $1.32 $1.30 $1.2 $35 $30 12,000 12,000 10,000

Answer 1

Pippin Piping Co
Income statement
Horizontal analysis
	2016	2015	Change	% change
Sales	$ 5,76,600.00	$ 5,23,000.00	$   53,600.00	10.2%
Cost of goods sold	$ 2,91,000.00	$ 2,59,200.00	$   31,800.00	12.3%
Gross Margin	$ 2,85,600.00	$ 2,63,800.00	$   21,800.00	8.3%
Operating expense	$ 1,06,200.00	$ 1,04,600.00	$      1,600.00	1.5%
Operating income	$ 1,79,400.00	$ 1,59,200.00	$   20,200.00	12.7%
Other revenues	$      22,500.00	$      15,900.00	$      6,600.00	41.5%
Interest expenses	$      11,200.00	$      10,500.00	$         700.00	6.7%
Income before income taxes	$ 1,90,700.00	$ 1,64,600.00	$   26,100.00	15.9%
Income tax expense	$      76,280.00	$      65,840.00	$   10,440.00	15.9%
Net income	$ 1,14,420.00	$      98,760.00	$   15,660.00	15.9%

Pippin Piping Co
Balance sheet
Horizontal analysis
Assets	2016	2015	Change	% change
Cash	$      32,000.00	$      25,800.00	$      6,200.00	24.0%
Accounts receivables	$ 1,26,860.00	$ 1,27,000.00	$       (140.00)	-0.1%
Inventory	$      60,000.00	$      80,700.00	$ (20,700.00)	-25.7%
Prepaid expenses	$      11,000.00	$      10,000.00	$      1,000.00	10.0%
Total Current assets	$ 2,29,860.00	$ 2,43,500.00	$ (13,640.00)	-5.6%
property plant and equipment	$ 6,68,900.00	$ 5,76,000.00	$   92,900.00	16.1%
Total Assets	$ 8,98,760.00	$ 8,19,500.00	$   79,260.00	9.7%
Liabilities and stockholder's equity
Accounts payable	$      53,120.00	$      81,200.00	$ (28,080.00)	-34.6%
Accrues expenses	$      11,000.00	$      12,240.00	$   (1,240.00)	-10.1%
Total Current liabilities	$      64,120.00	$      93,440.00	$ (29,320.00)	-31.4%
Long term debts	$ 1,70,000.00	$ 1,60,000.00	$   10,000.00	6.3%
Total liabilities	$ 2,34,120.00	$ 2,53,440.00	$ (19,320.00)	-7.6%
Stockholder’s equity
Common stock	$        6,000.00	$        6,000.00	$                   -	0.0%
Additional; paid in capital	$      99,000.00	$      99,000.00	$                   -	0.0%
Retained earnings	$ 5,59,640.00	$ 4,61,060.00	$   98,580.00	21.4%
Total Stockholder’s equity	$ 6,64,640.00	$ 5,66,060.00	$   98,580.00	17.4%
Total Liabilities and stockholder's equity	$ 8,98,760.00	$ 8,19,500.00	$   79,260.00	9.7%