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 700,000 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 $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 fiscal 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 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 $28. All of the company’s sales are on account.

Explanation / Answer

1) Accounts receivable turnover = Net credit sales/ average accounts receivable

= $ 77865 / (10900+7000)/2

= 8.7

2) average collection period = 365 days / accounts receivable turnover

= 365 / 8.7 = 41.95 days

3) Inventory turnover = cost of goods sold / average inventory

= $ 45540 / (13200+12100)/2

= 3.6

4) Average sale period = days in year/ inventory turnover

= 365 / 3.6 = 101.39 days

5) operating cycle = inventory period + accounts receivable period

= 101.39 + 41.95

= 143.34

6) Total assets turnover = net income / average total assets

= $ 8223 / (77281+69558)/2

= 11.20 %

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