The comparative statements of Wahlberg Company are presented here. WAHLBERG COMP

Question

The comparative statements of Wahlberg Company are presented here.

WAHLBERG COMPANY

Income Statements

For the Years Ended December 31 2019

2018 Net sales $1,890,540 $1,750,500 Cost of goods sold 1,058,540 1,006,000 Gross profit 832,000 744,500 Selling and administrative expenses 500,000 479,000 Income from operations 332,000 265,500 Other expenses and losses Interest expense 22,000 20,000 Income before income taxes 310,000 245,500 Income tax expense 92,000 73,000 Net income $218,000 $172,500

WAHLBERG COMPANY

Balance Sheets

December 31

Assets 2019 2018 Current assets Cash $60,100 $64,200 Debt investments (short-term) 74,000 50,000 Accounts receivable 117,800 102,800 Inventory 126,000 115,500 Total current assets 377,900 332,500 Plant assets (net) 649,000 520,300 Total assets $1,026,900 $852,800 Liabilities and Stockholders' Equity 2019 2018 Current liabilities Accounts payable $160,000 $145,400 Income taxes payable 43,500 42,000 Total current liabilities 203,500 187,400 Bonds payable 220,000 200,000 Total liabilities 423,500 387,400 Stockholders' equity Common stock ($5 par) 290,000 300,000 Retained earnings 313,400 165,400 Total stockholders' equity 603,400 465,400 Total liabilities and stockholders' equity $1,026,900 $852,800 All sales were on account. Net cash provided by operating activities for 2019 was $220,000. Capital expenditures were $136,000, and cash dividends were $70,000.

Instructions

Compute the following ratios for 2019.

(a) Earnings per share.

(b) Return on common stockholders' equity.

(c) Return on assets.

(d) Current ratio.

(e) Accounts receivable turnover.

(f) Average collection period.

(g) Inventory turnover.

(h) Days in inventory.

(i) Times interest earned.

(j) Asset turnover.

(k) Debt to assets ratio.

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Explanation / Answer

a) Earnings per share=Net income/Number of common stock outstanding Number of common stock outstanding=Common stock in $/Par value=290000/5=58000 shares Earnings per share=218000/58000=$3.76 per share b) Return on common stockholders=Net income/Average stockholder's equity Average stockholder's equity=(603400+465400)/2=534400 Return on common stockholders=218000/534400=40.79% c) Return on assets=Net income/Average total assets Average total assets=(1026900+852800)/2=939850 Return on assets=218000/939850=23.20% d) Current ratio=Current assets/Current liabilities 2019 1) Current assets 377900 2) Current liabilities 203500 3) Current ratio (1/2) 1.86 to 1 e) Accounts receivable turnover=Net sales/Average accounts receivable 2019 a. Net sales 1890540 b. Beginning accounts receivable 102800 c. Ending accounts receivable 117800 d. Average accounts receivable [(b)+©]/2 110300 e. Accounts receivable turnover 17.14 times f) Average collection period=365/Accounts receivable turnover ratio=365/17.14=21.30 days g) Inventory turnover ratio=Net sales/Average inventory 2019 a. Net sales 1890540 b. Beginning inventory 115500 c. Ending inventory 126000 d. Average inventory [(b)+©]/2 120750 e. Inventory turnover ratio (a)/(d) 15.66 times h) Days in inventory=365/Inventory turnover ratio=365/15.66=23.31 days i) Times interest earned ratio=Earnings before interest and taxes/interest expenses 2019 1) Net income 218000 2) Tax 92000 3) Interst expense 22000 4) Earnings before interst and taxes (1+2+3) 332000 5) Times interest earned ratio (4/3) 15.09 to 1 j) Asset turnover ratio=net sales/Average total assets=1890540/ Average total assets=(1026900+852800)/2=939850 Asset turnover ratio=1890540/939850=2.01 k) Debt to assets ratio=Total liabilities/Total assets=423500/1026900=0.41

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