Question

Using the Below​ Data:                                                                                                             

​A: Prepare an Income Statement using the information given below. Make sure to identify Gross​ Pofit, Operating​ Income, and Net Income.

​B: Calculate the​ P/E Ratio

Inventories	​$ 50,000
Cost of Goods Sold	​$ 250,000
Administrative Expenses	​$ 50,000
Accumulated Depreciation	​$ 150,000
Sales	​$ 600,000
Depreciation Expense	​$ 25,000
Selling Expense	​$ 150,000
Common Stoock Dividends	​$ 8,000
Interest Expense	​$ 8,000
Corporate Tax Rate	​40%
Cmmon Stock Shares	​100,000
Current Stock Market Price	​$ 19.50

​A: Income Statement ​ (Show all Work to Receive​ Credit)

Answer 1

​A: Income Statement ​ (Show all Work to Receive​ Credit)

Particular	Amt in $
Sales	600,000.00
Less: COGS	(250,000.00)
Gross Profit	350,000.00
Less: Depreciation	(25,000.00)
Less: Admin. Expenses	(50,000.00)
Less: Selling expense	(150,000.00)
Operating Income	125,000.00
Less: Interest Expense	(8,000.00)
Taxable Income	117,000.00
Less: Taxation (40%)	(46,800.00)
Net income	70,200.00

​B: Calculate the​ P/E Ratio

P/E Ratio = Current Price per share/earnings per share

where, earnings per share = Net Income/No of shares outstanding = $70,200/100,000

earnings per share = $0.702

P/E Ratio = $19.50/$0.702

P/E Ratio =27.78 times

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