Computing the Price-Earnings Ratio The income statement, statement of retained earnings, and balance sheet for Jeanette Company are as follows: Jeanette Company Income Statement For the Year Ended December 31, 20X2 Amount Percent Net sales $8,281,989 100.0% Less: Cost of goods sold (5,383,293) 65.0 Gross margin $2,898,696 35.0 Less: Operating expenses (1,323,368) 16.0 Operating income $1,575,328 19.0 Less: Interest expense Income before taxes Less: Income taxes (40%)* (50,000) $1,525,328 0.6 18.4 (610,131) 7.4 Net income $915,197 11.0 * Includes both state and federal taxes. Jeanette Company Statement of Retained Earnings For the Year Ended December 31, 20X2 Balance, beginning of period $1,979,155 Net income 915,197 Total $2,894,352 Preferred dividends (80,000) Dividends to common stockholders (201,887) Balance, end of period $2,612,465