Comparative financial statements for Weller Corporation, a merchandising company
ID: 2586845 • Letter: C
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 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 last year and $0.40 this year. 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.
Required:
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.)
2. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)
3. Inventory turnover. (Round your answer to 2 decimal places.)
4. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)
5. Operating cycle. (Round your intermediate calculations and final answer to 2 decimal places.)
6. Total asset turnover. (Round your answer to 2 decimal places.)
Weller CorporationComparative Balance Sheet
(dollars in thousands) This Year Last Year Assets Current assets: Cash $ 1,180 $ 1,340 Accounts receivable, net 9,700 8,500 Inventory 13,400 11,500 Prepaid expenses 650 610 Total current assets 24,930 21,950 Property and equipment: Land 9,000 9,000 Buildings and equipment, net 49,364 37,128 Total property and equipment 58,364 46,128 Total assets $ 83,294 $ 68,078 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 18,500 $ 18,200 Accrued liabilities 1,070 880 Notes payable, short term 280 280 Total current liabilities 19,850 19,360 Long-term liabilities: Bonds payable 9,700 9,700 Total liabilities 29,550 29,060 Stockholders' equity: Common stock 700 700 Additional paid-in capital 4,000 4,000 Total paid-in capital 4,700 4,700 Retained earnings 49,044 34,318 Total stockholders' equity 53,744 39,018 Total liabilities and stockholders' equity $ 83,294 $ 68,078
Explanation / Answer
Solution:
Numberator
/
Denominator
=
Ratio
1)
Accounts Receivable Turnover
Net Credit Sales
/
Average Accounts Receivable, net
=
Accounts Receivable Turnover
Accounts Receivable Turnover
$83,720
/
$9,100
[(9700+8500)/2]
=
9.20
times
2)
Average Collection Period
Number of days in a year
/
Accounts Receivable Turnover
=
Average Collectoin Period
in days
Average Collection Period
365
/
9.2
=
39.67
days
3)
Inventory Turnover
Cost of Goods Sold
/
Average Inventory
=
Inventory Turnover
times
Inventory Turnover
$39,840
/
$12,450
[((13400+11500)/2]
=
3.20
times
4)
Average Sale Period
Number of days in a year
/
Inventory Turnover
=
Average Sale Period
days
Average Sale Period
365
/
3.2
=
114.06
days
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Numberator
/
Denominator
=
Ratio
1)
Accounts Receivable Turnover
Net Credit Sales
/
Average Accounts Receivable, net
=
Accounts Receivable Turnover
Accounts Receivable Turnover
$83,720
/
$9,100
[(9700+8500)/2]
=
9.20
times
2)
Average Collection Period
Number of days in a year
/
Accounts Receivable Turnover
=
Average Collectoin Period
in days
Average Collection Period
365
/
9.2
=
39.67
days
3)
Inventory Turnover
Cost of Goods Sold
/
Average Inventory
=
Inventory Turnover
times
Inventory Turnover
$39,840
/
$12,450
[((13400+11500)/2]
=
3.20
times
4)
Average Sale Period
Number of days in a year
/
Inventory Turnover
=
Average Sale Period
days
Average Sale Period
365
/
3.2
=
114.06
days
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