Comparative financial statements for Weller Corporation, a merchandising company

Question

Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 500,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 10%. The income tax rate was 40% and the dividend per share of common stock was $1.00 last year and $0.40 this year. 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.

Required:

Compute the following financial data and ratios for this year:

1. Working capital.

2. Current ratio. (Round your answer to 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 $ 1,210 $ 1,250 Accounts receivable, net 10,600 8,400 Inventory 12,200 11,400 Prepaid expenses 660 520 Total current assets 24,670 21,570 Property and equipment: Land 9,800 9,800 Buildings and equipment, net 45,992 39,566 Total property and equipment 55,792 49,366 Total assets $ 80,462 $ 70,936 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 19,900 $ 18,000 Accrued liabilities 1,040 810 Notes payable, short term 190 190 Total current liabilities 21,130 19,000 Long-term liabilities: Bonds payable 8,400 8,400 Total liabilities 29,530 27,400 Stockholders' equity: Common stock 500 500 Additional paid-in capital 4,000 4,000 Total paid-in capital 4,500 4,500 Retained earnings 46,432 39,036 Total stockholders' equity 50,932 43,536 Total liabilities and stockholders' equity $ 80,462 $ 70,936

Explanation / Answer

1.

Working Capital = Current Assets - Current Liabilities

= 24,670 - 21,130

= 3,540

2.

Current ratio = Current Assets / Current Liabilities

= 24,670 / 21,130

= 1.17

3.

Acid test ratio = (Cash + Accounts Receivable) / Current Liabilities

= (1,210 + 10,600) / 21,130

= 0.56

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.