If a firm's price-earnings ratio is relatively low, then it might be an indication that

That people expect the firm's earning to fall

Price-Earning ratio is calculated by dividing Stock Price with its earning per share.

When people expect a firm's earning to fall, it will significantly lower its stock price and there for make the price-earning ratio become relatively low

Question Completion:

The adjusted trial balance for Tybalt Construction on December 31 of the current year follows.

TYBALT CONSTRUCTION

Adjusted Trial Balance December 31

No. Account Title                                    Debit       Credit

101 Cash                                                  $ 8,000

104 Short-term investments                   23,000

126 Supplies                                              9,300

128 Prepaid insurance                              8,400

167 Equipment                                        40,000

168 Accumulated depreciation-Equipment       $ 20,000

173 Building                                           180,000

174 Accumulated depreciation-Building               60,000

183 Land                                                 57,600

201 Accounts payable                                           15,000

203 Interest payable                                              2,200

208 Rent payable                                                   3,200

210 Wages payable                                                2,300

213 Property taxes payable                                      800

236 Unearned revenue                                         7,700

244 Current portion of long-term note payable  8,500

251 Long-term notes payable                            63,000

307 Common stock                                              7,500

318 Retained earnings                                      126,800

319 Dividends                                        14,300

404 Services revenue                                      103,000

406 Rent revenue                                               17,000

407 Dividends revenue                                       2,300

409 Interest revenue                                           2,700

606 Depreciation expense-Building    13,200

612 Depreciation expense-Equipment 6,000

623 Wages expense                           29,500

633 Interest expense                            4,700

637 Insurance expense                        9,400

640 Rent expense                               11,600

652 Supplies expense                         5,900

682 Postage expense                          2,900

683 Property taxes expense               3,400

684 Repairs expense                            8,100

688 Telephone expense                      3,100

690 Utilities expense                          3,600

Totals                                            $442,000 $442,000

TYBALT CONSTRUCTION

1a. Income Statement for the current year ended December 31:

404 Services revenue                                    $103,000

406 Rent revenue                                               17,000

407 Dividends revenue                                       2,300

409 Interest revenue                                           2,700

Total revenue                                                 $125,000

606 Depreciation expense-Building  $13,200

612 Depreciation expense-Equipment 6,000

623 Wages expense                           29,500

633 Interest expense                            4,700

637 Insurance expense                        9,400

640 Rent expense                               11,600

652 Supplies expense                         5,900

682 Postage expense                          2,900

683 Property taxes expense               3,400

684 Repairs expense                            8,100

688 Telephone expense                      3,100

690 Utilities expense                          3,600

Total expenses for the current period           $101,400

Net Income                                                       $23,600

1b.  Statement of Retained Earnings for the current year ended December 31:

318 Retained earnings                          $126,800

Net Income                                               23,600

319 Dividends                                            14,300

318 Retained earnings, December 31  $136,100

1c. Classified Balance Sheet at December 31:

Assets

Current Assets

101 Cash                                                  $ 8,000

104 Short-term investments                   23,000

126 Supplies                                              9,300

128 Prepaid insurance                              8,400

Total current assets                                                $48,700

Long-term assets:

167 Equipment                           40,000

168 Accumulated depreciation 20,000  20,000

173 Building                               180,000

174 Accumulated depreciation 60,000 120,000

183 Land                                                   57,600

Total long-term assets                                            $197,600

Total assets                                                            $246,300

Liabilities + Equity

Current Liabilities:

201 Accounts payable        $15,000

203 Interest payable              2,200

208 Rent payable                   3,200

210 Wages payable                2,300

213 Property taxes payable      800

236 Unearned revenue         7,700

244 Current portion of  

long-term note payable        8,500

Total current liabilities                              $39,700

Long-term liabilities:

251 Long-term notes payable                 $63,000

Total liabilities                                                          $102,700

Equity:

307 Common stock                                   $7,500

318 Retained earnings                              136,100

Total equity                                                              $143,600

Total liabilities and equity                                      $246,300  

2. Closing Entries at December 31 of the current year:

Debit:

404 Services revenue             $103,000

406 Rent revenue                        17,000

407 Dividends revenue                2,300

409 Interest revenue                    2,700

Credit Income Summary                          $125,000

To close the revenue accounts to the income summary.

Debit Income Summary $101,400

Credit:

606 Depreciation expense-Building  $13,200

612 Depreciation expense-Equipment 6,000

623 Wages expense                           29,500

633 Interest expense                            4,700

637 Insurance expense                        9,400

640 Rent expense                               11,600

652 Supplies expense                         5,900

682 Postage expense                          2,900

683 Property taxes expense               3,400

684 Repairs expense                            8,100

688 Telephone expense                      3,100

690 Utilities expense                          3,600

To close the expenses to the income summary.  

Debit Income Summary $23,600

Credit Retained earnings $23,600

To close the income summary to retained earnings.

Debit Retained Earnings $14,300

Credit Dividends $14,300

To close the dividends to retained earnings.

Explanation:

The four closing entries are a) closing revenues to income summary, b) closing expenses to income summary, c) closing income summary to retained earnings, and d) close dividends to retained earnings.