Question

Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear...

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 870,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, 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 $22. 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 $ 2,242 $ 3,130
Accounts receivable, net 15,100 10,100
Inventory 10,050 8,480
Prepaid expenses 1,870 2,240
Total current assets 29,262 23,950
Property and equipment:
Land 6,700 6,700
Buildings and equipment, net 19,900 19,700
Total property and equipment 26,600 26,400
Total assets $ 55,862 $ 50,350
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 10,200 $ 8,650
Accrued liabilities 740 1,050
Notes payable, short term 370 370
Total current liabilities 11,310 10,070
Long-term liabilities:
Bonds payable 7,500 7,500
Total liabilities 18,810 17,570
Stockholders' equity:
Common stock 870 870
Additional paid-in capital 4,550 4,550
Total paid-in capital 5,420 5,420
Retained earnings 31,632 27,360
Total stockholders' equity 37,052 32,780
Total liabilities and stockholders' equity $ 55,862 $ 50,350
Weller Corporation
Comparative Income Statement and Reconciliation
(dollars in thousands)
This Year Last Year
Sales $ 86,000 $ 81,000
Cost of goods sold 55,500 51,500
Gross margin 30,500 29,500
Selling and administrative expenses:
Selling expenses 9,200 8,700
Administrative expenses 12,700 11,700
Total selling and administrative expenses 21,900 20,400
Net operating income 8,600 9,100
Interest expense 900 900
Net income before taxes 7,700 8,200
Income taxes 3,080 3,280
Net income 4,620 4,920
Dividends to common stockholders 348 696
Net income added to retained earnings 4,272 4,224
Beginning retained earnings 27,360 23,136
Ending retained earnings $ 31,632 $ 27,360

Required:

Compute the following financial data for this year:

1. Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

2. Net profit margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

3. Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

4. Return on equity. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

1. Gross margin percentage %
2. Net profit margin percentage %
3. Return on total assets %
4. Return on equity %

Homework Answers

Answer #1

Return on assets and return on shareholders equity calculation based on Average total assets and average shareholders equity is as below

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