Analyzing and Interpreting an Income Statement and the Price/Earnings Ratio Pest Away Corporation was organized by three individuals on January 1, 2011, to provide insect extermination services. At the end of 2011, the following income statement was prepared:

Required:
1 What was the average amount of monthly revenue?
2 What was the amount of monthly rent?
3 Explain why supplies are reported as an expense.
4 Explain why interest is reported as an expense.
5 What was the average income tax rate for Pest Away Corporation?
6 Can you determine how much cash the company had on December 31, 2011? Explain.
7 If the company had a market value of \(\$ 468,000\), what is its price/earnings ratio?

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Revenues Service revenue (cash) Service revenue (credit) Total revenues PEST AWAY CORPORATION Income Statement For the Year Ended December 31, 2011 Expenses Salaries Rent Utilities Advertising Supplies Interest Total expenses Profit before income tax Income tax expense Profit for the year $192,000 24,000 $216,000 $ 76,000 21,000 12,000 14,000 25.000 8,000 156,000 S 60.000 21,000 $ 39,000