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 970,000 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 the year was $26. 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 $ 3,302 $ 4,230
Accounts receivable, net 16,100 9,100
Inventory 10,550 8,880
Prepaid expenses 1,970 2,440
Total current assets 31,922 24,650
Property and equipment:
Land 7,700 7,700
Buildings and equipment, net 20,900 20,700
Total property and equipment 28,600 28,400
Total assets $ 60,522 $ 53,050
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 11,200 $ 9,150
Accrued liabilities 940 1,550
Notes payable, short term 470 470
Total current liabilities 12,610 11,170
Long-term liabilities:
Bonds payable 7,500 7,500
Total liabilities 20,110 18,670
Stockholders' equity:
Common stock 970 970
Additional paid-in capital 5,050 5,050
Total paid-in capital 6,020 6,020
Retained earnings 34,392 28,360
Total stockholders' equity 40,412 34,380
Total liabilities and stockholders' equity $ 60,522 $ 53,050
Weller Corporation
Comparative Income Statement and Reconciliation
(dollars in thousands)
This Year Last Year
Sales $ 96,000 $ 91,000
Cost of goods sold 60,500 56,500
Gross margin 35,500 34,500
Selling and administrative expenses:
Selling expenses 10,200 9,700
Administrative expenses 13,700 12,700
Total selling and administrative expenses 23,900 22,400
Net operating income 11,600 12,100
Interest expense 900 900
Net income before taxes 10,700 11,200
Income taxes 4,280 4,480
Net income 6,420 6,720
Dividends to common stockholders 388 776
Net income added to retained earnings 6,032 5,944
Beginning retained earnings 28,360 22,416
Ending retained earnings $ 34,392 $ 28,360

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).)

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