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Refer to the following financial statements for Crosby Corporation: |
| CROSBY CORPORATION Income Statement For the Year Ended December 31, 2011 |
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| Sales | $ | 4,240,000 | |
| Cost of goods sold | 2,810,000 | ||
| Gross profit | $ | 1,430,000 | |
| Selling and administrative expense | 738,000 | ||
| Depreciation expense | 236,000 | ||
| Operating income | $ | 456,000 | |
| Interest expense | 88,000 | ||
| Earnings before taxes | $ | 368,000 | |
| Taxes | 173,000 | ||
| Earnings after taxes | $ | 195,000 | |
| Preferred stock dividends | 10,000 | ||
| Earnings available to common stockholders | $ | 185,000 | |
| Shares outstanding | 150,000 | ||
| Earnings per share | $ | 1.23 |
| Statement of Retained Earnings For the Year Ended December 31, 2011 |
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| Retained earnings, balance, January 1, 2011 | $ | 320,500 |
| Add: Earnings available to common stockholders, 2011 | 185,000 | |
| Deduct: Cash dividends declared and paid in 2011 | 181,000 | |
| Retained earnings, balance, December 31, 2011 | $ | 324,500 |
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Comparative Balance Sheets |
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| Year-End 2010 |
Year-End 2011 |
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| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 113,000 | $ | 481,600 | ||||
| Accounts receivable (net) | 563,000 | 607,000 | ||||||
| Inventory | 602,000 | 664,000 | ||||||
| Prepaid expenses | 60,900 | 30,900 | ||||||
| Total current assets | $ | 1,338,900 | $ | 1,783,500 | ||||
| Investments (long-term securities) | 91,600 | 89,600 | ||||||
| Gross plant and equipment | $ | 2,520,000 | $ | 2,640,000 | ||||
| Less: Accumulated depreciation | 1,940,000 | 2,176,000 | ||||||
| Net plant and equipment | 580,000 | 464,000 | ||||||
| Total assets | $ | 2,010,500 | $ | 2,337,100 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 342,000 | $ | 581,000 | ||||
| Notes payable | 548,000 | 548,000 | ||||||
| Accrued expenses | 75,000 | 51,600 | ||||||
| Total current liabilities | $ | 965,000 | $ | 1,180,600 | ||||
| Long-term liabilities: | ||||||||
| Bonds payable, 2011 | 135,000 | 242,000 | ||||||
| Total liabilities | $ | 1,100,000 | $ | 1,422,600 | ||||
| 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 | 320,500 | 324,500 | ||||||
| Total stockholders’ equity | $ | 910,500 | $ | 914,500 | ||||
| Total liabilities and stockholders’ equity | $ | 2,010,500 | $ | 2,337,100 | ||||
| a. |
Prepare a statement of cash flows for the Crosby Corporation: (Amounts to be deducted should be indicated with a minus sign.) |
| CROSBY CORPORATION Statement of Cash Flows For the Year Ended December 31, 2011 |
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Cash flows from operating activities: |
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(Click to select)Net incomeNet loss |
$ | |
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Adjustments to determine cash flow from operating activities: |
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(Click to select)Decrease in accrued expensesIncrease in accounts payableDecrease in prepaid expensesIncrease in inventoryDecrease in inventoryIncrease in accounts receivableAdd back depreciationDecrease in accounts receivable |
$ | |
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(Click to select)Increase in accounts receivableDecrease in prepaid expensesDecrease in accrued expensesIncrease in inventoryDecrease in accounts receivableIncrease in accounts payableDecrease in inventoryAdd back depreciation |
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(Click to select)Increase in inventoryDecrease in accrued expensesDecrease in prepaid expensesIncrease in accounts receivableDecrease in inventoryDecrease in accounts receivableAdd back depreciationIncrease in accounts payable |
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(Click to select)Increase in accounts payableIncrease in inventoryDecrease in inventoryAdd back depreciationDecrease in accrued expensesDecrease in prepaid expensesIncrease in accounts receivableDecrease in accounts receivable |
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(Click to select)Increase in accounts receivableDecrease in accrued expensesDecrease in prepaid expensesIncrease in accounts payableIncrease in inventoryDecrease in accounts receivableAdd back depreciationDecrease in inventory |
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(Click to select)Decrease in prepaid expensesAdd back depreciationIncrease in accounts receivableIncrease in accounts payableIncrease in inventoryDecrease in accrued expensesDecrease in inventoryDecrease in accounts receivable |
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Total adjustments |
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Net cash flows from operating activities |
$ | |
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Cash flows from investing activities: |
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(Click to select)Common stock dividends paidPreferred stock dividends paidIncrease in plant and equipmentIncrease in bonds payableDecrease in investmentsIncrease in inventoryDecrease in accrued expensesIncrease in accounts receivable |
$ | |
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(Click to select)Increase in plant and equipmentPreferred stock dividends paidDecrease in accrued expensesCommon stock dividends paidDecrease in investmentsIncrease in inventoryIncrease in accounts receivableIncrease in bonds payable |
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Net cash flows from investing activities |
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Cash flows from financing activities: |
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(Click to select)Increase in plant and equipmentIncrease in inventoryIncrease in accounts receivableIncrease in bonds payableDecrease in investmentsCommon stock dividends paidDecrease in accrued expensesPreferred stock dividends paid |
$ | |
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(Click to select)Common stock dividends paidDecrease in accrued expensesIncrease in accounts receivablePreferred stock dividends paidIncrease in plant and equipmentDecrease in investmentsIncrease in bonds payableIncrease in inventory |
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(Click to select)Increase in plant and equipmentIncrease in inventoryCommon stock dividends paidDecrease in accrued expensesIncrease in accounts receivableIncrease in bonds payablePreferred stock dividends paidDecrease in investments |
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Net cash flows from financing activities |
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Net increase (decrease) in cash flows |
$ | |
| b. |
Compute the book value per common share for both 2010 and 2011 for the Crosby Corporation. (Round your answers to 2 decimals places.) |
| Book value | |
| 2010 | $ |
| 2011 | $ |
| c. |
If the market value of a share of common stock is 2.5 times book value for 2011, what is the firm’s P/E ratio for 2011? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) |
| P/E ratio | times |
References
