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 600,000 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 $28. 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 $ 1,120 $ 1,260 Accounts receivable, net 10,000 7,600 Inventory 13,100 12,000 Prepaid expenses 730 610 Total current assets 24,950 21,470 Property and equipment: Land 10,500 10,500 Buildings and equipment, net 39,993 37,232 Total property and equipment 50,493 47,732 Total assets $ 75,443 $ 69,202 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 18,600 $ 17,500 Accrued liabilities 1,020 820 Notes payable, short term 270 270 Total current liabilities 19,890 18,590 Long-term liabilities: Bonds payable 9,300 9,300 Total liabilities 29,190 27,890 Stockholders' equity: Common stock 600 600 Additional paid-in capital 4,000 4,000 Total paid-in capital 4,600 4,600 Retained earnings 41,653 36,712 Total stockholders' equity 46,253 41,312 Total liabilities and stockholders' equity $ 75,443 $ 69,202 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 74,800 $ 66,000 Cost of goods sold 46,435 38,000 Gross margin 28,365 28,000 Selling and administrative expenses: Selling expenses 11,400 10,300 Administrative expenses 7,400 6,900 Total selling and administrative expenses 18,800 17,200 Net operating income 9,565 10,800 Interest expense 930 930 Net income before taxes 8,635 9,870 Income taxes 3,454 3,948 Net income 5,181 5,922 Dividends to common stockholders 240 450 Net income added to retained earnings 4,941 5,472 Beginning retained earnings 36,712 31,240 Ending retained earnings $ 41,653 $ 36,712 Required: Compute the following financial data for this year: 1. Accounts receivable turnover. (Assume that all sales are on account.) (Round your answer to 2 decimal places.) 2. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.) 3. Inventory turnover. (Round your answer to 2 decimal places.) 4. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.) 5. Operating cycle. (Round your intermediate calculations and final answer to 2 decimal places.) 6. Total asset turnover. (Round your answer to 2 decimal places.)

Answer 1

accounts receivable turnover	Sales / average accounts receivable
	this year ($)
sales	74800
opening accounts receivable	7600
closing accounts receivable	10000
average accounts receivable	8800
accounts receivable turnover	8.50
average collection period	365 days / accounts receivable turnover
	this year
accounts receivable turnover	8.50
average collection period	42.94
inventory turnover	cost of goods sold / average inventory
	this year ($)
cost of goods sold	46435
opening inventory	12000
closing inventory	13100
average inventory	12550
inventory turnover	3.70
average sale period	365 days / inventory turnover
	this year ($)
inventory turnover	3.70
average sale period	98.65