Question

Refer to the following financial statements for Crosby Corporation CROSBY CORPORATION Income Statement For the Year Ended December 31, 20X2 Sales Cost of goods sold Gross profit Selling and administrative expense Depreciation expense Operating income Interest expense $3,900,000 2,470,000 $1,430,000 618,000 290,000 $ 522,000 Earnings before taxes Taxes $ 434,900 127,000 S 307,900 Earnings after taxes Preferred stock dividends Earnings available to common stockholders Shares outstanding Earnings per share 297,900 150,000 Statement of Retained Earnings For the Year Ended December 31, 20X2 Retained earnings, balance, January 1, 20X2 $1,079,600 Add: Earnings available to common stockholders, 20X2 297,900 170,000 $1,207,500 Deduct: Cash dividends declared and paid in 20X2 Retained earnings, balance, December 31, 20X2 Comparative Balance Sheets For 20X1 and 20X2 Year-End 20X2 ear 20X1 Current assets $ 102,000 507,000 698,000 60,300 $1,367,300 97,000 $ 48,500 600,000 754,000 37,900 $1,440,400 Accounts receivable (net) Inventory Prepaid expenses Total current assets Investments (long-term securities) Gross plant and equipment Less: Accumulated depreciation Net plant and equipment $ 2,630,000 1,370,000 $ 3,280,000 1,660,000 1,260,000 $2,724,300 1,620,000 $3,148,500 Total assets Liabilities and Stockholders' Equity Current liabilities $ 321,000 553,000 75,700 S 949,700 $ 583,000 553,000 53,000 $1,189,000 Notes payable expenses Total current liabilities Long-term liabilities Bonds payable, 20X2 Total liabilities 105,000 $1,054,700 162,000 $1,351,000 Stockholders' equity: Preferred stock, $100 par value Common stock, $1 par value Capital paid in excess of par Retained earnings Total stockholders' equity $ 90,000 150,000 350,000 1,079,600 $ 90,000 150,000 350,000 1.207 500 $1,797,500 $3,148,500 Total liabilities and stockholders' equity $2,724,300

Answer 1

a)	STATEMENT OF CASH FLOWS
	Cash flows from operating activities:
	Net income		307900
	Adjustments to reconcile net income to net cash profived by operations:
	Depreciation expense	290000
	Increase in accounts receivable = 507000-600000 =	-93000
	Increase in inventory = 698000-754000 =	-56000
	Decrease in prepaid expenses = 60300-37900 =	22400
	Increase in accounts payable = 583000-321000 =	262000
	Decrease in accrued expenses = 53000-75700 =	-22700	402700
	Net cash provided by operating activities		710600
	Cash flows from investing activities:
	Purchase of PP&E = 2630000-3280000 =	-650000
	Sale of long term investments =97000-88100=	8900
	Issue of bonds (162000-105000)	57000
	Net cash used by investing activities		-584100
	Cash flows from financing activities:
	Preferred stock dividends	-10000
	Common stock Dividends	-170000
	Net cash used by financing activities		-180000
	Net increase (decrease) in cash		-53500
	Beginning cash and cash equivalents		102000
	Ending cash and cash equivalents		48500
b)		20X1	20X2
	Total stockholders' equity	1669600	1797500
	Less: Preferred stock	90000	90000
	Total common stock equity	1579600	1707500
	Number of common shares outstanding	150000	150000
	Book value per common share	$       10.53	$    11.38
c)	Market value at 3.3 times of book value =	$       34.75	$    37.55
	EPS		$      1.99
	P/E = 37.55/1.99 =		18.87
	Note: Comparison with 20X1 cannot be made as details for EPS is not
	available.