Question

Problem 18-02A (Video) The comparative statements of Wahlberg Company are presented here. Wahlberg Company Income Statement For the Years Ended December 31 2020 2019 Net sales $1,810,000 $1,745,000 Cost of goods sold 1,005,000 970,000 Gross profit 805,000 775,000 Selling and administrative expenses 511,000 472,000 Income from operations 294,000 303,000 Other expenses and losses Interest expense 17,000 13,000 Income before income taxes 277,000 290,000 Income tax expense 77,500 76,000 Net income $ 199,500 $ 214,000 Wahlberg Company Balance Sheets December 31 Assets 2020 2019 Current assets Cash $59,000 $63,000 Debt investments (short-term) 68,000 49,000 Accounts receivable 116,000 101,000 Inventory 122,000 114,000 Total current assets 365,000 327,000 Plant assets (net) 595,000 515,000 Total assets $960,000 $842,000 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $159,000 $144,000 Income taxes payable 42,000 41,000 Total current liabilities 201,000 185,000 Bonds payable 220,000 200,000 Total liabilities 421,000 385,000 Stockholders’ equity Common stock ($5 par) 275,000 295,000 Retained earnings 264,000 162,000 Total stockholders’ equity 539,000 457,000 Total liabilities and stockholders’ equity $960,000 $842,000 All sales were on account. Net cash provided by operating activities for 2020 was $257,000. Capital expenditures were $123,000, and cash dividends were $97,500. Compute the following ratios for 2020. (Round Earnings per share, Current ratio and Asset turnover to 2 decimal places, e.g. 1.65 or 1.65:1, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%. Use 365 days for calculation.) (a) Earnings per share $ (b) Return on common stockholders’ equity % (c) Return on assets % (d) Current ratio :1 (e) Accounts receivable turnover times (f) Average collection period days (g) Inventory turnover times (h) Days in inventory days (i) Times interest earned times (j) Asset turnover times (k) Debt to assets ratio % (l) Free cash flow $ Click if you would like to Show Work for this question: Open Show Work

Answer 1

Solution 1. a) Earnings per share = 194500 / 275000 + 245000)/2 15] = 3.50 Return on common stock holders equity = 199500/( 539000 + 457000)/2] = 40.0 % 1. b) Return on 960000 + 849.000)/2 asset2 = = 19 22.1% d) Current ratio = 365000 201000 - 1.81 : 1 e Accounts receivable turnover = 181 116000 + 10ooo = 166 f) Average collection period = .365/16.6 = 22 days g) 4 1 Janventory turnover = 1005000 ([128000 + 114000)/2] - 8.5 timer Days in Inventory = 365/8.5 = 42.9 days Timer Interest earned = (199500 + 17000 + 77500)/17000 1. = 17.2 times Asset tuan over = 1910000 /[6960000 +842000)/2] - 2 times 3)

Debt to assets = 421000/960000 = 43.8% - free cash flow = 257000 - 123000 - 97500 36500