Exercise 14-11 Wiemers Corporation’s comparative balance sheets are presented be

Question

Exercise 14-11

Wiemers Corporation’s comparative balance sheets are presented below.

WIEMERS CORPORATION

Balance Sheets

December 31

                                                                    2016                               2017

Cash                                                             $4,000                          $3,500

Accounts receivable (net)                              $21,100                        $23,200

Inventory                                                       $10,300                       $7,500

Land                                                             $20,100                       $26,400

Buildings                                                      $70,000                      $70,000

Accumulated depreciation—buildings              ($15,100)                 ($10,900)

Total ------------------------------------------------------------ $110,400                   $119,700

Accounts payable                                            $12,200                     $31,400

Common stock                                               $75,500                     $68,700

Retained earnings                                          $22,700                     $19,600

Total -----------------------------------------------------      $110,400                  $119,700

Wiemers’s 2017 income statement included net sales of $116,000, cost of goods sold of $60,100, and net income of $16,000.

Compute the following ratios for 2017. (Round Debt to assets ratio to 1 decimal place, e.g. 1.6, or 1.6% and all other answers to 2 decimal places, e.g. 1.65, or 1.65% .)

(a) Current ratio                                                                     ? :1

(b) Acid-test ratio                                                                   ? :1

(c) Accounts receivable turnover                                        ? times

(d) Inventory turnover                                                        ? times

(e) Profit margin                                                                  ? %

(f) Asset turnover                                                           ? times

(g) Return on assets                                                            ? %

(h) Return on common stockholders’ equity                   ? %

(i) Debt to assets ratio                                                       ? %

Explanation / Answer

(a) Current ratio

Current asset / current laibilities = 34,200 / 31,400 = 1.09 : 1

Note : 34,200 ( 3,500 + 23,200 + 7,500)

b) Acid test ratio

Liquid Asset / Current Liabilities = 26,700 / 31,400 = 0.85 : 1

Note 26,700 ( 3,500 + 23,200)

c) Account Receivable turnover

Net Credit Sales / Average account receivables = 116,000 / 22,150 = 5.24 times

Note : Avg. Account Receivables = (21,100 + 23,200 ) / 2 = 22,150

d) Inventory turnover

COGS / Avg Inventory = 60,100 / 8,900 = 6.75 times

Note : Avg Inventory =( 10,300 + 7,500)/2 = 8,900

e) Profit Margin

Net Income / Net sales = 16,000 / 116,000 = 13.79%

f) Asset Turnover ratio

Net Sales / Average Total Asset = 116,000 / 115,050 = 1 times

Note : Avg. Total Asset = (110,400+119,700)/2 = 115,050

g) Return on Asset

Net Income / Average Total Asset = 16,000 / 115,050 = 13.91%

h) Return on Common Stakeholders' Equity

Net income / stake holder's Equity = 16,000 / 68,700 = 23.29%

i) Debt to Asset ratio

Debt / total Asset = 31,400 / 119,700 = 26.23%

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