Question

Refer to the following financial statements for Crosby Corporation:   
  

CROSBY CORPORATION Income Statement For the Year Ended December 31, 20X2
Sales		$	3,860,000
Cost of goods sold			2,330,000
Gross profit		$	1,530,000
Selling and administrative expense			744,000
Depreciation expense			279,000
Operating income		$	507,000
Interest expense			81,000
Earnings before taxes		$	426,000
Taxes			198,000
Earnings after taxes		$	228,000
Preferred stock dividends			10,000
Earnings available to common stockholders		$	218,000
Shares outstanding			150,000
Earnings per share		$	1.45

  

Statement of Retained Earnings For the Year Ended December 31, 20X2
Retained earnings, balance, January 1, 20X2	$	725,100
Add: Earnings available to common stockholders, 20X2		218,000
Deduct: Cash dividends declared and paid in 20X2		148,000
Retained earnings, balance, December 31, 20X2	$	795,100

  

Comparative Balance Sheets For 20X1 and 20X2
	Year-End 20X1				Year-End 20X2
Assets
Current assets:
Cash		$	103,000			$	92,700
Accounts receivable (net)			511,000				518,000
Inventory			680,000				708,000
Prepaid expenses			60,900				39,200
Total current assets		$	1,354,900			$	1,357,900
Investments (long-term securities)			94,100				87,300
Gross plant and equipment	$ 2,510,000				$ 3,160,000
Less: Accumulated depreciation	1,550,000				1,829,000
Net plant and equipment			960,000				1,331,000
Total assets		$	2,409,000			$	2,776,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	323,000			$	634,000
Notes payable			508,000				508,000
Accrued expenses			71,900				53,100
Total current liabilities		$	902,900			$	1,195,100
Long-term liabilities:
Bonds payable, 20X2			191,000				196,000
Total liabilities		$	1,093,900			$	1,391,100
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			725,100				795,100
Total stockholders’ equity		$	1,315,100			$	1,385,100
Total liabilities and stockholders’ equity		$	2,409,000			$	2,776,200

  
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 3.3 times book value for 20X1, what is the firm’s P/E ratio for 20X2 vs. 20X1? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
  

Answer 1