Comparative financial statements for Weller Corporation, a merchandising company

Question

Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal 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 bonds, which were sold at their face value, 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 $28. All of the company’s sales are on account.

Working capital. (Enter your answer in thousands)

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

Weller Corporation
Comparative Balance Sheet
(dollars in thousands) This Year Last Year   Assets   Current assets:      Cash $ 1,190 $ 1,360      Accounts receivable, net 9,500 7,900      Inventory 13,100 10,600      Prepaid expenses 740 560   Total current assets 24,530 20,420   Property and equipment:      Land 10,900 10,900      Buildings and equipment, net 45,093 37,599   Total property and equipment 55,993 48,499   Total assets $ 80,523 $ 68,919   Liabilities and Stockholders' Equity   Current liabilities:      Accounts payable $ 19,900 $ 17,400      Accrued liabilities 950 860      Notes payable, short term 230 230   Total current liabilities 21,080 18,490   Long-term liabilities:      Bonds payable 9,100 9,100   Total liabilities 30,180 27,590   Stockholders' equity:      Common stock 700 700      Additional paid-in capital 4,000 4,000        Total paid-in capital 4,700 4,700        Retained earnings 45,643 36,629   Total stockholders' equity 50,343 41,329   Total liabilities and stockholders' equity $ 80,523 $ 68,919 Weller Corporation
Comparative Income Statement and Reconciliation
(dollars in thousands) This Year Last Year   Sales $ 67,000 $ 65,000   Cost of goods sold 33,000 36,000   Gross margin 34,000 29,000   Selling and administrative expenses:   Selling expenses 10,800 10,400   Administrative expenses 6,800 7,000   Total selling and administrative expenses 17,600 17,400   Net operating income 16,400 11,600   Interest expense 910 910   Net income before taxes 15,490 10,690   Income taxes 6,196 4,276   Net income 9,294 6,414   Dividends to common stockholders 280 525   Net income added to retained earnings 9,014 5,889   Beginning retained earnings 36,629 30,740   Ending retained earnings $ 45,643 $ 36,629 Required: Compute the following financial data and ratios for this year: part1.

Working capital. (Enter your answer in thousands)

part2.

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

part3. Acid-test ratio. (Round your answer to 2 decimal places.)

Explanation / Answer

1)Working capital for this year =current asset -current liabilities

        = 24530-21080

          = 3450

2)current ratio =current asset /current liabilities

     = 24530/21080

    = 1.16

3)Acid test ratio = [current asset - inventory -prepaid expense ]/current liabilities

    = [24530-13100-740]/21080

= 10690/21080

   = .51 times

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