Question

Pinnacle Manufacturing Company
Income Statement
For the Year ended December 31
	2016	2015	2014
Net sales	$150,737,628	$148,586,037	$144,686,413
Cost of goods sold	109,284,780	106,255,499	101,988,165
Gross profit	41,452,848	42,330,538	42,698,248
Operating expenses	37,177,738	38,133,969	37,241,108
Income from operations	4,275,110	4,196,569	5,457,140
Other revenues and gains	—	—	—
Other expenses and losses	2,181,948	2,299,217	2,397,953
Income before income tax	2,093,162	1,897,352	3,059,187
Income tax	883,437	858,941	1,341,536
Net income for the year	1,209,725	1,038,411	1,717,651
Earnings per share	$1.21	$1.04	$1.72

Pinnacle Manufacturing Company
Balance Sheet
As of December 31
Assets	2016	2015	2014
Current assets
Cash and cash equivalents	$7,721,279	$7,324,846	$8,066,545
Net receivables	13,042,165	8,619,857	7,936,409
Inventory	32,236,021	25,537,198	25,271,503
Other current assets	172,278	143,206	131,742
Total current assets	53,171,743	41,625,107	41,406,199
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
Current liabilities
Accounts payable	$12,969,686	$9,460,776	$7,586,374
Short/current long-term debt	15,375,819	10,298,668	9,672,670
Other current liabilities	2,067,643	1,767,360	1,682,551
Total current liabilities	30,413,148	21,526,804	18,941,595
Long-term debt	24,420,090	22,342,006	22,379,920
Total liabilities	54,833,238	43,868,810	41,321,515
Stockholders’ equity
Common stock	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 & stockholders’ equity	$115,434,790	$103,260,637	$99,674,931

D. Use the income statement information to prepare a common-size income statement for all three years. Use the information to identify accounts for which you believe there is a concern about material misstatement. Use a format similar to the following:   

Account Balance	Estimate amount of potential mistatement

Answer 1

Answer:

There could be misstament with :

Account Balance - Net Receivable by $4,422,308
Account Balance - Short/ Current Long term Debt by $5,077,151