Comparative financial statements for Weller Corporation, a merchandising company

ID: 2474665 • Letter: C

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.)

Explanation / Answer

Solution:

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.) Accounts Receivable Turnover = Net Sales /Average accounts receivable, net Accounts Receivable Turnover Choose Numerator: / Choose Denominator: = Accounts Receivable Turnover Net Sales / Average accounts receivable, net = Accounts Receivable Turnover This year $79,000 / 10,700 = 7.38 times Last year $74,000 / 10,700 = 6.92 times Average accounts receivable, net calculation is shown below : This year Last year Accounts receivable, net 12,300 9,100 Accounts receivable, net 12,300+9,100 = 21,400/2= 10,700 2. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.) Average collection period = 365 days ÷ Accounts receivable turnover This year 365 days ÷ 7.38 = 49.46 days Last year 365 days ÷ 6.92 = 52.75 days 3. Inventory turnover. (Round your answer to 2 decimal places.) Inventory turnover = Cost of goods sold / Average inventory Inventory Turnover Choose Numerator: / Choose Denominator: = Inventory Turnover Cost of goods sold / Average inventory = Inventory Turnover This year $52,000 / 8,950 = 5.81 times Last year $48,000 / 8,950 = 5.36 times Average inventory calculation is shown below : This year Last year Inventory 9,700 8,200 Average inventory 9,700+8,200 = 17,900 / 2 = 8,950 4. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.) Average sale period = 365 days ÷ Inventory turnover (see above) This year = 365 days ÷ 5.81 = 62.82 days Last year = 365 days ÷ 5.36 = 68.09 days 5. Operating cycle. (Round your answer to 2 decimal places.) The operating cycle is the inventory period plus the receivables period. The inventory turnover and inventory period are: Operating cycle = Average sales period + Average collection period This year Operating cycle = 62.82 days + 49.46 days = 112.28 days Last year Operating cycle = 68.09 days + 52.75 days = 120.84 days 6. Total asset turnover. (Round your answer to 2 decimal places.) Asset turnover ratio = Net sales / Total assets This year Asset turnover ratio = $79,000/$50,280 = 157.12% Last year Asset turnover ratio = $74,000/$45,960 = 161.01%

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Comparative financial statements for Weller Corporation, a merchandising company

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Comparative financial statements for Weller Corporation, a merchandising company

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