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 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 $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 $ 1,140 $ 1,400
Accounts receivable, net 9,300 7,400
Inventory 12,800 10,800
Prepaid expenses 740 600
Total current assets 23,980 20,200
Property and equipment:
Land 10,200 10,200
Buildings and equipment, net 44,446 41,793
Total property and equipment 54,646 51,993
Total assets $ 78,626 $ 72,193
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 20,400 $ 18,400
Accrued liabilities 1,060 710
Notes payable, short term 220 220
Total current liabilities 21,680 19,330
Long-term liabilities:
Bonds payable 8,200 8,200
Total liabilities 29,880 27,530
Stockholders' equity:
Common stock 700 700
Additional paid-in capital 4,000 4,000
Total paid-in capital 4,700 4,700
Retained earnings 44,046 39,963
Total stockholders' equity 48,746 44,663
Total liabilities and stockholders' equity $ 78,626 $ 72,193
Weller Corporation
Comparative Income Statement and Reconciliation
(dollars in thousands)
This Year Last Year
Sales $ 66,000 $ 66,000
Cost of goods sold 40,000 33,000
Gross margin 26,000 33,000
Selling and administrative expenses:
Selling expenses 10,700 10,300
Administrative expenses 6,800 6,800
Total selling and administrative expenses 17,500 17,100
Net operating income 8,500 15,900
Interest expense 820 820
Net income before taxes 7,680 15,080
Income taxes 3,072 6,032
Net income 4,608 9,048
Dividends to common stockholders 525 525
Net income added to retained earnings 4,083 8,523
Beginning retained earnings 39,963 31,440
Ending retained earnings $ 44,046 $ 39,963

Required:

Compute the following financial data and ratios for this year:

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

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

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

Homework Answers

Answer #1
  • Requirement 1 and 2

This Year

A

Total Current Assets

$23,980

B

Total Current Liabilities

$21,680

C = A - B

Working Capital

$2,300

Answer [1]

D = A/B

Current Ratio

1.11

Answer [2]

  • Requirement 3

A

Total Current Assets

$23,980

B

Prepaid Expenses

$740

C

Inventory

$12,800

D = A-B-C

Quick Assets

$10,440

E

Total Current Liabilities

$21,680

F = D/E

Acid Test Ratio

0.48

Answer [3]

  • In case of any issue regarding correctness, please leave a comment.
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