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 $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 $27. 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	$	1,270		$	1,340
Accounts receivable, net		9,600			8,200
Inventory		13,400			12,100
Prepaid expenses		750			620
Total current assets		25,020			22,260
Property and equipment:
Land		9,500			9,500
Buildings and equipment, net		53,031			39,485
Total property and equipment		62,531			48,985
Total assets	$	87,551		$	71,245
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	20,000		$	18,300
Accrued liabilities		970			850
Notes payable, short term		240			240
Total current liabilities		21,210			19,390
Long-term liabilities:
Bonds payable		9,000			9,000
Total liabilities		30,210			28,390
Stockholders' equity:
Common stock		700			700
Additional paid-in capital		4,000			4,000
Total paid-in capital		4,700			4,700
Retained earnings		52,641			38,155
Total stockholders' equity		57,341			42,855
Total liabilities and stockholders' equity	$	87,551		$	71,245

Total liabilities and stockholders' equity $87,551 $71,245 Weller Corporation Comparative Income Statement and Reconciliatiorn (dollars in thousands) This Year Last Year Sales Cost of goods sold Gross margin Selling and administrative expenses: $79,210 $66,000 35 70035,000 43,510 31,000 10,600 10,500 7,4006,700 17,200 13,800 900 12,900 5,160 7,740 525 7,215 38,155 30,940 Selling expenses Administrative expenses Total selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes Net income Dividends to common stockholders Net income added to retained earnings Beginning retained earnings 18,000 25, 510 900 24,610 9,844 14,766 280 14,486 $52,641$38,155 Ending retained earnings Required: Compute the following financial data for this year: ts recsiy able turnover. (Assume that all sales are on account.) (Round your answe 1 Arcounts receiy

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

1) Account receivable turnover = Sales/Average receivable = 79210/8900 = 8.90 Times

2) Average collection period = 365/8.9 = 41.01 days

3) Inventory turnover = Cost of goods sold/Average inventory = 35700/12750 = 2.80 Times

4) Average sale period = 365/2.8 = 130.36 days

5) Operating cycle = 130.36+41.01 = 171.37 days

6) Assets turnover = Sales/Average assets = 79210/79398 = 0.99 Times