Question

Problem 14-2A (Video)

The comparative statements of Wahlberg Company are presented here.

Wahlberg Company Income Statement For the Years Ended December 31
		2020			2019
Net sales		$1,815,700			$1,749,500
Cost of goods sold		1,011,000			981,000
Gross profit		804,700			768,500
Selling and administrative expenses		515,000			477,600
Income from operations		289,700			290,900
Other expenses and losses
Interest expense		19,000			14,300
Income before income taxes		270,700			276,600
Income tax expense		80,521			76,700
Net income		$ 190,179			$ 199,900

Wahlberg Company Balance Sheets December 31
Assets		2020			2019
Current assets
Cash		$60,900			$63,800
Debt investments (short-term)		68,900			51,000
Accounts receivable		116,700			102,300
Inventory		123,800			115,700
Total current assets		370,300			332,800
Plant assets (net)		600,600			517,800
Total assets		$970,900			$850,600
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$159,900			$144,200
Income taxes payable		44,000			42,600
Total current liabilities		203,900			186,800
Bonds payable		220,000			200,000
Total liabilities		423,900			386,800
Stockholders’ equity
Common stock ($5 par)		279,200			297,100
Retained earnings		267,800			166,700
Total stockholders’ equity		547,000			463,800
Total liabilities and stockholders’ equity		$970,900			$850,600

All sales were on account. Net cash provided by operating activities for 2020 was $245,000. Capital expenditures were $131,000, and cash dividends were $89,079.

Compute the following ratios for 2020. (Round Earnings per share, Current ratio and Asset turnover to 2 decimal places, e.g. 1.65 or 1.65:1, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%. Use 365 days for calculation.)

(a)		Earnings per share		$
(b)		Return on common stockholders’ equity			%
(c)		Return on assets			%
(d)		Current ratio			:1
(e)		Accounts receivable turnover			times
(f)		Average collection period			days
(g)		Inventory turnover			times
(h)		Days in inventory			days
(i)		Times interest earned			times
(j)		Asset turnover			times
(k)		Debt to assets ratio			%
(l)		Free cash flow		$

Answer 1

a.

Earning per share = Net income / Number of outstanding shares

Number of outstanding shares = 279,200/5 = 55,840

Earning per share = $190,179/55,840 = $3.40

b.

Return on common stockholders’ equity = Net income / Average common equity

Average common equity = ($279,200+$297,100)/2 = $288,150

Return on common stockholders’ equity = $190,179 / $288,150 = .66

c.

Return on assets = Net income / Average total asset

Average total asset = ($970,900+$850,600)/2 = $910,750

Return on assets = $190,179 / $910,750 = .21

d.

Current ratio = Current asset / Current liability

Current ratio = $370,300 / $203,900 = 1.81