Comparative financial statements for Weller Corporation, a merchandising company

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 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 $0.40 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.

Accounts receivable turnover. (Assume that all sales are on account.) (Round your answer to 2 decimal places.)

Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)

Inventory turnover. (Round your answer to 2 decimal places.)

Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)

Operating cycle. (Round your intermediate calculations and final answer to 2 decimal places.)

Total asset turnover. (Round your answer to 2 decimal places.)

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 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 $0.40 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.

Explanation / Answer

Solution 1:

Accounts receivables turnover = Credit Sales / Average accounts receivables

Average accounts receivables = (beginning accounts receivables + Ending accounts receivables) / 2

= ($9,200 + $6,800)/2 = $8,000

Accounts receivables turnover = $68,800 / $8,000 = 8.60 times

Solution B:

Average collection periotd = Nos of days in a year / Accounts receivables turnover ratio

= 365/8.60 = 42.44 days

Solution c:

Inventory turnover ratio = Cost of goods sold / Average inventory

Average inventory = ($12,600 + $11,800)/2 = $12,200

Inventory tunrover ratio = $45,140 / $12,200 = 3.7 times

Soluiton D:

Averaga sale period = 365 / inventory turnover ratio = 365 / 3.7 = 98.65 days

Solution E:

Operaiting cycle = Average collection period + average sales period = 42.44 days + 98.65 days = 141.09 days

Solution F:

Total assets turnover = Sales / Averags total assets

Average total assets = ($75,561 + $70,805) / 2 = $73,183

Total assets turnover = $68,800 / $73,183 = 0.94

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.