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 600,000 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 $1.00. The market value of the company’s common stock at the end of the year was $26. All of the company’s sales are on account.

1. Working Capital?

2. Current Ratio (Round to the nearest 2 decimal places)?

3.Acid-test 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 $ 1,330      Accounts receivable, net 10,600 8,100      Inventory 14,000 12,300      Prepaid expenses 630 590   Total current assets 26,420 22,320   Property and equipment:      Land 10,900 10,900      Buildings and equipment, net 40,312 35,226   Total property and equipment 51,212 46,126   Total assets $ 77,632 $ 68,446   Liabilities and Stockholders' Equity   Current liabilities:      Accounts payable $ 20,300 $ 19,000      Accrued liabilities 1,060 830      Notes payable, short term 140 140   Total current liabilities 21,500 19,970   Long-term liabilities:      Bonds payable 9,400 9,400   Total liabilities 30,900 29,370   Stockholders' equity:      Common stock 600 600      Additional paid-in capital 4,000 4,000        Total paid-in capital 4,600 4,600        Retained earnings 42,132 34,476   Total stockholders' equity 46,732 39,076   Total liabilities and stockholders' equity $ 77,632 $ 68,446

Explanation / Answer

Working Capital = Current Assets - Current Liabilities.

                             =$26,420-$21,500

                              =$4920

Current ration= Current Assets /Current Liabilities

                         =1.23

Quick ratio=Total current asset-Inventory-prepaid expenses/ Current Liabilities

       =$26,420-14000-630/21500

        =0.55

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