Question

Every answer I get for 1-6 tells me i'm wrong.

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 $0.75 last year and $0.40 this year. The market value of the company’s common stock at the end of this year was $23. All of the company’s sales are on account.

Weller Corporation Comparative Balance Sheet (dollars in thousands)
	This Year			Last Year
Assets
Current assets:
Cash	$	1,090		$	1,340
Accounts receivable, net		10,100			7,900
Inventory		13,100			11,000
Prepaid expenses		750			600
Total current assets		25,040			20,840
Property and equipment:
Land		10,600			10,600
Buildings and equipment, net		45,986			35,132
Total property and equipment		56,586			45,732
Total assets	$	81,626		$	66,572
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	20,000		$	17,600
Accrued liabilities		1,010			850
Notes payable, short term		120			120
Total current liabilities		21,130			18,570
Long-term liabilities:
Bonds payable		9,300			9,300
Total liabilities		30,430			27,870
Stockholders' equity:
Common stock		700			700
Additional paid-in capital		4,000			4,000
Total paid-in capital		4,700			4,700
Retained earnings		46,496			34,002
Total stockholders' equity		51,196			38,702
Total liabilities and stockholders' equity	$	81,626		$	66,572

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	83,700		$	66,000
Cost of goods sold		43,380			42,000
Gross margin		40,320			24,000
Selling and administrative expenses:
Selling expenses		10,900			10,800
Administrative expenses		7,200			6,000
Total selling and administrative expenses		18,100			16,800
Net operating income		22,220			7,200
Interest expense		930			930
Net income before taxes		21,290			6,270
Income taxes		8,516			2,508
Net income		12,774			3,762
Dividends to common stockholders		280			700
Net income added to retained earnings		12,494			3,062
Beginning retained earnings		34,002			30,940
Ending retained earnings	$	46,496		$	34,002

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.)

Answer 1

Answer :- Computation of the following ratios for this year :-

1. Accounts Receivable Turnover = Net credit sales/ Average accounts receivable

Accounts Receivable Turnover = $83,700 /($10,100+$7,900)/2

Accounts Receivable Turnover = 9.3

2. Average Collection Period = 365 / 9.3 = 39.25 days

3. Inventory Turnover =Cost of goods sold / Average Inventory

Inventory Turnover = $43,380 / ($13,100 + $11,000)/2

Inventory Turnover = 3.6

4. Average Sale Period = 365 / 3.6 = 101.38 days

5. Operating Cycle = Average Collection period + Average sale period

Operating Cycle = 39.25 + 101.38 = 140.64 days

6. Total asset Turnover = Net Sales / Average total assets

Total Assets Turnover = $83,700 / ($81,626 + $66,572)/2

Total Assets Turnover = 1.12

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