The Balance Sheets at the End of Each of the First

question 29

Multiple Choice

The balance sheets at the end of each of the first two years of operations indicate the following: $\begin{array}{lrr}&2017&2018\\\text { Total current assets } & \$ 600,000 & \$ 560,000 \\\text { Total investments } & 60,000 & 40,000 \\\text { Total property, plant, and equipment } & 900,000 & 700,000 \\\text { Total current liabilities } & 125,000 & 80,000\\\text { Total long-term liabilities } & 350,000 & 250,000 \\\text { Preferred } 9 \% \text { stock, } \$ 100 \text { par } & 100,000 & 100,000 \\\text { Common stock, } \$ 10 \text { par } & 600,000 & 600,000 \\\text { Paid-in capital in excess of par-common stock } & 60,000 & 60,000 \\\text { Retained earnings } & 325,000 & 210,000\end{array}$ ? Based on the above information, if net income is $130,000 and interest expense is $40,000 for 2017, and the market price is $40, what is the price-earnings ratio on common stock (round to one decimal place) ?

• A) 14.9
• B) 19.8
• C) 17.3
• D) 18.4

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