$2.$ Statement of cash flows Refer to the following financial statements for Crosby Corporation:

a$)$ Prepare a statement of cash flows for the Crosby Corporation using the general procedures indicated in Table $210.$

b$)$ Describe the general relationship between net income and net cash flows from operating activities for the firm.

c$)$ Has the buildup in plant and equipment been financed in a satisfactory manner? Briefly discuss.

d$)$ Compute the book value per common share for both $2021$ and $2022$ for the Crosby Corporation.

e$)$ If the market value of a share of common stock is $3\mathrm{.}3$ times book value for $2021,$ what is the firm$$s P$/$E ratio for $2022?$

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CROSBY CORPORATION

Income Statement

For the Year Ended December $31,2022$

Sales $$2,200,000$

Cost of goods sold $1,300,000$

Gross profits $900,000$

Selling and administrative expense $420,000$

Depreciation expense $150,000$

Operating income $330,000$

Interest expense $90,000$

Earnings before taxes $240,000$

Taxes $80,000$

Earnings after taxes $160,000$

Preferred stock dividends $10,000$

Earnings available to common stockholders $ $150,000$

Shares outstanding $120,000$

Earnings per share $ $1\mathrm{.}25$

Statement of Retained Earnings

For the Year Ended December $31,2022$

Retained earnings, balance, January $1,20$X$2$ $$500,000$

Add: Earnings available to common stockholders, $20$X$2150,000$

Deduct: Cash dividends declared and paid in $20$X$250,000$

Retained earnings, balance, December $31,20$X$2$ $$600,000$

Comparative Balance Sheets

For $2021$ and $2022$

Year$-$End Year$-$End

Assets $20212022$

Current assets:

Cash $ $70,000$ $$100,000$

Accounts receivable $($net$)300,000350,000$

Inventory $410,000430,000$

Prepaid expenses $50,00030,000$

Total current assets $830,000910,000$

Investments $($long$-$term securities$)80,00070,000$

Plant and equipment $2,000,0002,400,000$

Less: Accumulated depreciation $1,000,0001,150,000$

Net plant and equipment $1,000,0001,250,000$

Total assets $$1,910,000$ $$2,230,000$

Liabilities and Stockholders$$ Equity

Current liabilities:

Accounts payable $ $250,000$ $ $440,000$

Notes payable $400,000400,000$

Accrued expenses $70,00050,000$

Total current liabilities $720,000890,000$

Long$-$term liabilities:

Bonds payable, $20$X$270,000120,000$

Total liabilities $790,0001,010,000$

Stockholders$$ equity:

Preferred stock, $$100$ par value $90,00090,000$

Common stock, $$1$ par value $120,000120,000$

Capital paid in excess of par $410,000410,000$

Retained earnings $500,000600,000$

Total stockholders$$ equity $1,120,0001,220,000$

Total liabilities and stockholders$$ equity $$1,910,000$ $$2,230,000$

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