Question

Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 700,000 shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and $0.40 this year. The market value of the company’s common stock at the end of this year was $25. All of the company’s sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year			Last Year
Assets
Current assets:
Cash	$	1,220		$	1,280
Accounts receivable, net		10,300			7,100
Inventory		13,600			11,400
Prepaid expenses		760			610
Total current assets		25,880			20,390
Property and equipment:
Land		10,600			10,600
Buildings and equipment, net		40,240			34,920
Total property and equipment		50,840			45,520
Total assets	$	76,720		$	65,910
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	20,300		$	17,500
Accrued liabilities		1,050			760
Notes payable, short term		150			150
Total current liabilities		21,500			18,410
Long-term liabilities:
Bonds payable		9,500			9,500
Total liabilities		31,000			27,910
Stockholders' equity:
Common stock		700			700
Additional paid-in capital		4,000			4,000
Total paid-in capital		4,700			4,700
Retained earnings		41,020			33,300
Total stockholders' equity		45,720			38,000
Total liabilities and stockholders' equity	$	76,720		$	65,910

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	69,000		$	64,000
Cost of goods sold		37,000			42,000
Gross margin		32,000			22,000
Selling and administrative expenses:
Selling expenses		11,100			10,200
Administrative expenses		6,500			6,500
Total selling and administrative expenses		17,600			16,700
Net operating income		14,400			5,300
Interest expense		950			950
Net income before taxes		13,450			4,350
Income taxes		5,380			1,740
Net income		8,070			2,610
Dividends to common stockholders		350			350
Net income added to retained earnings		7,720			2,260
Beginning retained earnings		33,300			31,040
Ending retained earnings	$	41,020		$	33,300

Required:

Compute the following financial data and ratios for this year:

1. Working capital. (Enter answer in thousands.)

2. Current ratio. (Round your answer to 2 decimal places.)

3. Acid-test ratio. (Round your answer to 2 decimal places.)

Answer 1