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 800,000 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 $18. 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 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 fiscal year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 800,000 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 $18. All of the company’s sales are on account.

Explanation / Answer

Solution:

1) Accounts Receivable Turnover = Credit Sales / Average Receivables = $79,000 / $10,700 = 7.38 times

Average Receivables = (Beginning Receivable + Ending Receivables)/2 = ($9,100 + $12,300)/2 = $10,700

Credit Sales (this year) = $79,000

2) Average Collection Period = Average Accounts Receivables / Average Daily Credit Sales = $10,700 / 216.438 = 49.44 days

Daily Credit Sales = $79,000 / 365 = 216.438

3) Inventory Turnover = Cost of Goods Sold / Average Inventory = $52,000 / $8,950 = 5.81 times

Average Receivables = (Beginning Inventory + Ending Inventory)/2 = ($9,700 + $8,200)/2 = $8,950

4) Average Sale Period = Accounts Receivable at the end of period / Net Credit Sales x 365 = $12,300 / $79,000 x 365 = 56.829 days or 56.83 days

5) Please ask separate question as it involve lot of calculation..

6) Total Asset Turnover = Sales / Average Total Asset = $79,000 / 48,120 = 1.64 times

Average Total Asset = ($50,280 + $45,960)/2 = $48,120

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