Question

Refer to the following financial statements for Crosby Corporation:   
  

CROSBY CORPORATION Income Statement For the Year Ended December 31, 20X2
Sales		$	3,790,000
Cost of goods sold			2,420,000
Gross profit		$	1,370,000
Selling and administrative expense			744,000
Depreciation expense			238,000
Operating income		$	388,000
Interest expense			80,200
Earnings before taxes		$	307,800
Taxes			168,000
Earnings after taxes		$	139,800
Preferred stock dividends			10,000
Earnings available to common stockholders		$	129,800
Shares outstanding			150,000
Earnings per share		$	0.87

  

Statement of Retained Earnings For the Year Ended December 31, 20X2
Retained earnings, balance, January 1, 20X2	$	895,700
Add: Earnings available to common stockholders, 20X2		129,800
Deduct: Cash dividends declared and paid in 20X2		239,000
Retained earnings, balance, December 31, 20X2	$	786,500

  

Comparative Balance Sheets For 20X1 and 20X2
	Year-End 20X1				Year-End 20X2
Assets
Current assets:
Cash		$	110,000			$	389,800
Accounts receivable (net)			535,000				549,000
Inventory			671,000				710,000
Prepaid expenses			65,900				32,800
Total current assets		$	1,381,900			$	1,681,600
Investments (long-term securities)			98,200				84,900
Gross plant and equipment	$ 2,830,000				$ 2,980,000
Less: Accumulated depreciation	1,620,000				1,858,000
Net plant and equipment			1,210,000				1,122,000
Total assets		$	2,690,100			$	2,888,500
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	397,000			$	630,000
Notes payable			569,000				569,000
Accrued expenses			78,400				54,000
Total current liabilities		$	1,044,400			$	1,253,000
Long-term liabilities:
Bonds payable, 20X2			160,000				259,000
Total liabilities		$	1,204,400			$	1,512,000
Stockholders’ equity:
Preferred stock, $100 par value		$	90,000			$	90,000
Common stock, $1 par value			150,000				150,000
Capital paid in excess of par			350,000				350,000
Retained earnings			895,700				786,500
Total stockholders’ equity		$	1,485,700			$	1,376,500
Total liabilities and stockholders’ equity		$	2,690,100			$	2,888,500

  
a. Prepare a statement of cash flows for the Crosby Corporation: (Amounts to be deducted should be indicated with parentheses or a minus sign.)

b. Compute the book value per common share for both 20X1 and 20X2 for the Crosby Corporation. (Round your answers to 2 decimals places.)
  

c. If the market value of a share of common stock is 1.9 times book value for 20X2, what is the firm’s P/E ratio for 20X2? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
  

Answer 1

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