You will prepare a common size income statement, estimate potential misstatements and discuss methods for this estimate and the accounts that are at risk 2011 2010 2009 ASSETS Dollar Value Dollar Value Dollar Value CURRENT ASSETS Cash and cash equivalents $7,721,279 $7,324,846 $8,066,545 Accounts receivable Trade 14,008,633 9,586,325 8,879,352 Less Allowance for bad debts (966,468) (966,468) (942,943) Inventory 32,236,021 25,537,198 25,271,503 Prepaid expenses 119,081 106,353 102,650 Deposits 53,197 36,853 29,092 Total current assets 53,171,743 41,625,107 41,406,199 PROPERTY, PLANT, AND EQUIPMENT Land 11,490,036 11,490,036 4,159,580 Automobiles 266,071 220,313 220,313 Accum depreciation Automobiles (198,218) (166,835) (122,769) Office equipment 5,494,707 5,238,368 4,924,055 Accum depreciation Office equipment (2,962,472) (2,136,395) (1,417,025) Manufacturing equipment 13,918,820 11,543,824 11,179,813 Accum depreciation Manufacturing equipment (3,319,983) (2,796,754) (2,429,272) Manufacturing building 41,106,800 38,056,625 38,056,625 Accum depreciation Manufacturing building (11,098,836) (8,410,681) (7,074,110) Office building 13,262,479 13,025,447 13,025,447 Accum depreciation Office building (5,696,357) (4,428,418) (2,253,925) Total property, plant, and equipment 62,263,047 61,635,530 58,268,732 TOTAL ASSETS $115,434,790 $103,260,637 $99,674,931 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Note payable Bank $11,459,080 $10,257,598 $9,631,600 Accounts payable Trade 12,969,686 9,460,776 7,586,374 Current portion of long term debt 3,916,739 41,070 41,070 Accrued payroll and withholding taxes 1,593,276 1,263,461 1,238,454 Accrued interest 229,575 196,545 178,478 Federal income taxes payable 244,792 307,354 265,619 Total current liabilities 30,413,148 21,526,804 18,941,595 LONG TERM DEBT 24,420,090 22,342,006 22,379,920 STOCKHOLDERS' EQUITY Common stock $1 par value Authorized 1,500,000 shares Issued and outstanding 1,000,000 shares 1,000,000 1,000,000 1,000,000 Additional paid in capital 15,717,645 15,717,645 15,717,645 Retained earnings 43,883,907 42,674,182 41,635,771 Total stockholders' equity 60,601,552 59,391,827 58,353,416 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $115,434,790 $103,260,637 $99,674,931 2011 2010 2009 Dollar Value Dollar Value Dollar Value Sales 150,918,731 148,764,555 144,860,245 Sales Returns and Allowances 181,103 178,518 173,832 Cost of Sales 109,284,780 106,255,499 101,988,165 Gross Profit 41,452,848 42,330,538 42,698,248 OPERATING EXPENSES Allocated Salaries Management 2,281,266 2,387,993 2,295,081 Salaries Office 315,169 296,681 306,856 Licensing and certification fees 190,650 172,883 162,279 Security 550,603 637,580 630,353 Insurance 93,197 103,842 108,491 Medical benefits 23,721 29,453 28,810 Advertising 162,512 178,009 165,678 Business publications 6,989 5,555 774 Property taxes 22,585 178,009 175,692 Bad debts 841,699 1,034,060 992,094 Depreciation expense 5,336,783 4,641,982 4,367,565 Accounting fees 273,956 297,777 299,789 Total operating expenses Allocated 10,099,130 9,963,824 9,533,462 OPERATING EXPENSES Direct Salaries Sales 14,970,669 15,327,777 14,904,392 Wages Rental 491,794 595,389 575,725 Wages Mechanics 1,113,539 1,339,626 1,333,411 Wages Warehouse 4,891,065 5,340,271 5,473,249 Garbage collection 27,649 29,771 37,969 Payroll benefits 2,657,889 2,937,730 2,894,300 Rent Warehouse 802,855 764,346 758,345 Telephone 32,402 45,173 57,867 Utilities 262,393 267,005 274,365 Postage 89,763 133,518 151,278 Linen service 17,282 12,350 16,083 Repairs and maintenance 166,985 168,405 178,213 Cleaning service 89,800 81,589 78,088 Legal service 396,016 190,540 152,238 Fuel 286,547 341,192 279,512 Travel and entertainment 103,389 103,842 100,479 Pension expense 228,555 237,350 127,011 Office supplies 149,828 148,340 171,109 Miscellaneous 300,188 105,931 144,012 Total operating expenses Direct 27,078,608 28,170,145 27,707,646 Total Operating Expenses 37,177,738 38,133,969 37,241,108 Operating Income 4,275,110 4,196,569 5,457,140 Other Expense Interest 2,181,948 2,299,217 2,397,953 Income Before Taxes 2,093,162 1,897,352 3,059,187 Federal Income Taxes 883,437 858,941 1,341,536 Net Income 1,209,725 1,038,411 1,717,651

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You will prepare a common-size income statement, estimate potential misstatements and discuss methods for this estimate and the accounts that are at risk. 2011 2010

You will prepare a common-size income statement, estimate potential misstatements and discuss methods for this estimate and the accounts that are at risk.


	2011	2010	2009
ASSETS	Dollar Value	Dollar Value	Dollar Value

CURRENT ASSETS
Cash and cash equivalents	$7,721,279	$7,324,846	$8,066,545
Accounts receivable: Trade	14,008,633	9,586,325	8,879,352
Less: Allowance for bad debts	(966,468)	(966,468)	(942,943)
Inventory	32,236,021	25,537,198	25,271,503
Prepaid expenses	119,081	106,353	102,650
Deposits	53,197	36,853	29,092
Total current assets	53,171,743	41,625,107	41,406,199

PROPERTY, PLANT, AND EQUIPMENT
Land	11,490,036	11,490,036	4,159,580
Automobiles	266,071	220,313	220,313
Accum. depreciation: Automobiles	(198,218)	(166,835)	(122,769)
Office equipment	5,494,707	5,238,368	4,924,055
Accum.depreciation: Office equipment	(2,962,472)	(2,136,395)	(1,417,025)
Manufacturing equipment	13,918,820	11,543,824	11,179,813
Accum. depreciation: Manufacturing equipment	(3,319,983)	(2,796,754)	(2,429,272)
Manufacturing building	41,106,800	38,056,625	38,056,625
Accum. depreciation: Manufacturing building	(11,098,836)	(8,410,681)	(7,074,110)
Office building	13,262,479	13,025,447	13,025,447
Accum.depreciation: Office building	(5,696,357)	(4,428,418)	(2,253,925)
Total property, plant, and equipment	62,263,047	61,635,530	58,268,732
TOTAL ASSETS	$115,434,790	$103,260,637	$99,674,931

LIABILITIES AND STOCKHOLDERS' EQUITY
		-	-
CURRENT LIABILITIES
Note payable: Bank	$11,459,080	$10,257,598	$9,631,600
Accounts payable: Trade	12,969,686	9,460,776	7,586,374
Current portion of long-term debt	3,916,739	41,070	41,070
Accrued payroll and withholding taxes	1,593,276	1,263,461	1,238,454
Accrued interest	229,575	196,545	178,478
Federal income taxes payable	244,792	307,354	265,619
Total current liabilities	30,413,148	21,526,804	18,941,595

LONG-TERM DEBT	24,420,090	22,342,006	22,379,920

STOCKHOLDERS' EQUITY
Common stock: $1 par value
Authorized: 1,500,000 shares
Issued and outstanding: 1,000,000 shares	1,000,000	1,000,000	1,000,000
Additional paid-in capital	15,717,645	15,717,645	15,717,645
Retained earnings	43,883,907	42,674,182	41,635,771
Total stockholders' equity	60,601,552	59,391,827	58,353,416
		-	-
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$115,434,790	$103,260,637	$99,674,931

	2011	2010	2009
	Dollar Value	Dollar Value	Dollar Value
Sales	150,918,731	148,764,555	144,860,245
Sales Returns and Allowances	181,103	178,518	173,832
Cost of Sales*	109,284,780	106,255,499	101,988,165
Gross Profit	41,452,848	42,330,538	42,698,248
OPERATING EXPENSES-Allocated
Salaries-Management	2,281,266	2,387,993	2,295,081
Salaries-Office	315,169	296,681	306,856
Licensing and certification fees	190,650	172,883	162,279
Security	550,603	637,580	630,353
Insurance	93,197	103,842	108,491
Medical benefits	23,721	29,453	28,810
Advertising	162,512	178,009	165,678
Business publications	6,989	5,555	774
Property taxes	22,585	178,009	175,692
Bad debts	841,699	1,034,060	992,094
Depreciation expense	5,336,783	4,641,982	4,367,565
Accounting fees	273,956	297,777	299,789
Total operating expenses-Allocated	10,099,130	9,963,824	9,533,462
OPERATING EXPENSES-Direct
Salaries-Sales	14,970,669	15,327,777	14,904,392
Wages Rental	491,794	595,389	575,725
Wages-Mechanics	1,113,539	1,339,626	1,333,411
Wages-Warehouse	4,891,065	5,340,271	5,473,249
Garbage collection	27,649	29,771	37,969
Payroll benefits	2,657,889	2,937,730	2,894,300
Rent- Warehouse	802,855	764,346	758,345
Telephone	32,402	45,173	57,867
Utilities	262,393	267,005	274,365
Postage	89,763	133,518	151,278
Linen service	17,282	12,350	16,083
Repairs and maintenance	166,985	168,405	178,213
Cleaning service	89,800	81,589	78,088
Legal service	396,016	190,540	152,238
Fuel	286,547	341,192	279,512
Travel and entertainment	103,389	103,842	100,479
Pension expense	228,555	237,350	127,011
Office supplies	149,828	148,340	171,109
Miscellaneous	300,188	105,931	144,012
Total operating expenses-Direct	27,078,608	28,170,145	27,707,646
Total Operating Expenses	37,177,738	38,133,969	37,241,108
Operating Income	4,275,110	4,196,569	5,457,140
Other Expense-Interest	2,181,948	2,299,217	2,397,953
Income Before Taxes	2,093,162	1,897,352	3,059,187
Federal Income Taxes	883,437	858,941	1,341,536
Net Income	1,209,725	1,038,411	1,717,651