Question

= Blue Spruce Corporation had net sales revenue of $5,770,000 and investment revenue of $226,000 for the year ended December 31, 2020. Other items pertaining to 2020 were as follows: 

$4,590,000 465.000 Cost of goods sold Salaries and wages expense (sales) Advertising expense Entertainment expense Selling expenses 130,000 79,000 674,000 303.000 Salaries and wages expense (administrative) Rent expense Utilities expense Administrative expenses 114,000 40,000 457,000 Increase in value of company reputation Unrealized gain on value of patents 73,000 35,000 172,000 85,000 Interest expense Income tax expense

Blue Spruce has 100,000 common shares outstanding throughout the year. 

Prepare a multiple-step income statement for Blue Spruce Corporation Showing expenses by function. Include calculation of EPS. (Round per share answer to 2 decimal places, e.g. 52.75.) 

Assume the average market price for the common shares is $5.58. What is Blue Spruce's price-earnings ratio? 

Answer 1

Requirement #1

Blue Spruce Corporation
Income Statement
For the Year Ended December 31, 2020
Particulars	Amount	Amount	Amount
Sales revenues			$5,770,000
Cost of goods sold			$4,590,000
Gross profit			$1,180,000
Operating expenses:
Selling expenses
Salaries and wage expense (sales)	$465,000
Advertising expense	$130,000
Entertainment expense	$79,000	$674000
Administrative expenses
Salaries and wage expense (administrative)	$303,000
Rent expense	$114,000
Utilities expense	$40000	$457,000	$1,131,000
Income from operations			$49,000
Other revenues and gains:
Investment revenue			$226,000
			$275,000
Other expenses and losses:
Interest expense			$172,000
Income before income tax:			$103,000
Income tax			$85,000
Net income			$18,000
Earnings per share ($18,000 ÷ 100,000 shares)			$0.18

Requirement #2:

Calculate price-earnings ratio as follows

Price-earnings ratio = Market price per share ÷ Earnings per share

= $5.58 ÷ $0.18

= 31%

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