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 the 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 $ 1,160 $ 1,340
Accounts receivable, net 9,900 7,800
Inventory 13,000 10,700
Prepaid expenses 670 540
Total current assets 24,730 20,380
Property and equipment:
Land 10,400 10,400
Buildings and equipment, net 46,386 42,138
Total property and equipment 56,786 52,538
Total assets $ 81,516 $ 72,918
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 20,200 $ 18,800
Accrued liabilities 980 800
Notes payable, short term 180 180
Total current liabilities 21,360 19,780
Long-term liabilities:
Bonds payable 8,200 8,200
Total liabilities 29,560 27,980
Stockholders' equity:
Common stock 700 700
Additional paid-in capital 4,000 4,000
Total paid-in capital 4,700 4,700
Retained earnings 47,256 40,238
Total stockholders' equity 51,956 44,938
Total liabilities and stockholders' equity $ 81,516 $ 72,918
Weller Corporation
Comparative Income Statement and Reconciliation
(dollars in thousands)
This Year Last Year
Sales $ 72,000 $ 66,000
Cost of goods sold 41,000 32,000
Gross margin 31,000 34,000
Selling and administrative expenses:
Selling expenses 10,900 10,400
Administrative expenses 7,000 6,200
Total selling and administrative expenses 17,900 16,600
Net operating income 13,100 17,400
Interest expense 820 820
Net income before taxes 12,280 16,580
Income taxes 4,912 6,632
Net income 7,368 9,948
Dividends to common stockholders 350 350
Net income added to retained earnings 7,018 9,598
Beginning retained earnings 40,238 30,640
Ending retained earnings $ 47,256 $ 40,238

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
1
This Year Last Year
Total current assets 24730 20380
Less: Total current liabilities 21360 19780
Working capital 3370 600
2
This Year Last Year
Total current assets 24730 20380
Divide by Total current liabilities 21360 19780
Current ratio 1.16 1.03
3
This Year Last Year
Cash 1160 1340
Accounts receivable, net 9900 7800
Total quick assets 11060 9140
Divide by Total current liabilities 21360 19780
Acid-test ratio 0.52 0.46
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