Comparative financial statements for Weller Corporation, a merchandising company
ID: 2592206 • 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 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 $0.40 this year. The market value of the company’s common stock at the end of the year was $24. 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 $ 1,160 $ 1,400 Accounts receivable, net 9,600 6,800 Inventory 13,700 11,400 Prepaid expenses 800 530 Total current assets 25,260 20,130 Property and equipment: Land 10,200 10,200 Buildings and equipment, net 39,372 36,881 Total property and equipment 49,572 47,081 Total assets $ 74,832 $ 67,211 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 20,300 $ 19,200 Accrued liabilities 1,090 720 Notes payable, short term 160 160 Total current liabilities 21,550 20,080 Long-term liabilities: Bonds payable 8,900 8,900 Total liabilities 30,450 28,980 Stockholders' equity: Common stock 500 500 Additional paid-in capital 4,000 4,000 Total paid-in capital 4,500 4,500 Retained earnings 39,882 33,731 Total stockholders' equity 44,382 38,231 Total liabilities and stockholders' equity $ 74,832 $ 67,211
Explanation / Answer
Answer:
Compute the following financial data for this year:
1.
Accounts receivable turnover. =9
Calculation of accounts receivable turnover:
Beginning balance, accounts receivable (a)
6800
Ending balance, accounts receivable (b)
9600
Average accounts receivable balance [(a) + (b)]/2
8200
Accounts receivable turnover:
=Sales / Average accounts receivable balance
=73800 /8200
=9
_______________________________________________________
2.
Average collection period. =40.56 days
calculation for Average collection period
Average collection period
=365/ Accounts receivable turnover:
=365 /9
=40.56 days
_____________________________________________________
3.
Inventory turnover. =3.5
calculation of the Inventory turnover.
Beginning balance, inventory (a)
11400
Ending balance, inventory (b)
13700
Average inventory balance [(a) + (b)]/2
12550
the Inventory turnover
=Cost of gods sold / Average inventory balance
=43925/12550
=3.5
_____________________________________________________
4.
Average sale period=104.29 days
Calculation of the Average sale period
Average sale period
=365/ Inventory turnover
=365/3.5
=104.29 days
_____________________________________
5.
Operating cycle=144.84 days
Calculation of the Operating cycle
Operating cycle
= inventory period+ account recivable period
=40.56+104.29
=144.84 days
_________________________________________
6.
Total asset turnover. =1.04
Calculation of the Total asset turnover.
Beginning balance, Assets (a)
67211
Ending balance, Assets (b)
74832
Average Assets balance [(a) + (b)]/2
71021.5
Total asset turnover.
=sales / average total Assets
=73800 /71021.5
=1.04
Beginning balance, accounts receivable (a)
6800
Ending balance, accounts receivable (b)
9600
Average accounts receivable balance [(a) + (b)]/2
8200
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