For December 31, 20X1, the balance sheet of Baxter Corporation was as follows:

Current Assets

Liabilities

Cash

$

27,000

Accounts payable

$

29,000

Accounts receivable

32,000

Notes payable

37,000

Inventory

42,000

Bonds payable

67,000

Prepaid expenses

13,700

Fixed Assets

Stockholders Equity

Gross plant and equipment

$

267,000

Preferred stock

$

37,000

Less: Accumulated depreciation

53,400

Common stock

72,000

Paid in Capital

42,000

Net plant and equipment

$

213,600

Retained earnings

44,300

Total assets

$

328,300

Total liabilities and stockholders equity

$

328,300

Sales for 20X2 were $305,000, and the cost of goods sold was 55 percent of sales. Selling and administrative expense was $30,500. Depreciation expense was 10 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 12 percent, while the interest rate on the bonds payable was 14 percent. This interest expense is based on December 31, 20X1 balances. The tax rate averaged 30 percent.

$3,700 in preferred stock dividends were paid, and $3,481 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding.

During 20X2, the cash balance and prepaid expenses balances were unchanged. Accounts receivable and inventory increased by 12 percent. A new machine was purchased on December 31, 20X2, at a cost of $52,000.

Accounts payable increased by 20 percent. Notes payable increased by $7,700 and bonds payable decreased by $18,500, both at the end of the year. The preferred stock, common stock, and capital paid in excess of par accounts did not change.

a.Prepare an income statement for 20X2.(Round EPS answer to 2 decimal places.)

b.Prepare a statement of retained earnings for 20X2.

c.Prepare a balance sheet as of December 31, 20X2.(Amounts to be deducted should be indicated with parentheses or a minus sign.)

6.

Refer to the following financial statements for Crosby Corporation:

CROSBY CORPORATION

Income Statement

For the Year Ended December 31, 20X2

Sales

$

3,940,000

Cost of goods sold

2,580,000

Gross profit

$

1,360,000

Selling and administrative expense

697,000

Depreciation expense

272,000

Operating income

$

391,000

Interest expense

88,000

Earnings before taxes

$

303,000

Taxes

234,000

Earnings after taxes

$

69,000

Preferred stock dividends

10,000

Earnings available to common stockholders

$

59,000

Shares outstanding

150,000

Earnings per share

$

0.39

Statement of Retained Earnings

For the Year Ended December 31, 20X2

Retained earnings, balance, January 1, 20X2

$

342,700

Add: Earnings available to common stockholders, 20X2

59,000

Deduct: Cash dividends declared and paid in 20X2

218,000

Retained earnings, balance, December 31, 20X2

$

183,700

Comparative Balance Sheets

For 20X1 and 20X2

Year-End

20X1

Year-End

20X2

Assets

Current assets:

Cash

$

171,000

$

127,000

Accounts receivable (net)

543,000

546,000

Inventory

656,000

697,000

Prepaid expenses

63,500

39,700

Total current assets

$

1,433,500

$

1,409,700

Investments (long-term securities)

92,000

81,100

Gross plant and equipment

$ 2,250,000

$ 2,730,000

Less: Accumulated depreciation

1,750,000

2,022,000

Net plant and equipment

500,000

708,000

Total assets

$

2,025,500

$

2,198,800

Liabilities and Stockholders Equity

Current liabilities:

Accounts payable

$

365,000

$

626,000

Notes payable

514,000

514,000

Accrued expenses

79,800

57,100

Total current liabilities

$

958,800

$

1,197,100

Long-term liabilities:

Bonds payable, 20X2

134,000

228,000

Total liabilities

$

1,092,800

$

1,425,100

Stockholders equity:

Preferred stock, $100 par value

$

90,000

$

90,000

Common stock, $1 par value

150,000

150,000

Capital paid in excess of par

350,000

350,000

Retained earnings

342,700

183,700

Total stockholders equity

$

932,700

$

773,700

Total liabilities and stockholders equity

$

2,025,500

$

2,198,800

a.Prepare a statement of cash flows for the Crosby Corporation:(Amounts to be deducted should be indicated with parentheses or a minus sign.)

b.Compute the book value per common share for both 20X1 and 20X2 for the Crosby Corporation.(Round your answers to 2 decimals places.)

c.If the market value of a share of common stock is 3.3 times book value for 20X1, what is the firms P/E ratio for 20X2 vs. 20X1?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)