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 600,000 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 $30. All of the company's sales are on account Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year $ 1,270 10, 980 12.209 670 25,040 $ 1,240 8,300 11.500 690 21,738 10,200 59,317 69,517 $94,557 10,200 39,918 50, 118 $71, 848 Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: Land Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Notes payable, short term Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $19,200 83e $19,300 960 220 20,480 220 20,250 8,700 29, 180 8,700 28,950 6ee 600 4. Bee 4.600 60,777 65, 377 $94,557 4, eee 4,600 38,298 42.898 $71,848 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales 591,200 $65,000 Cost of goods sold 34, 365 34,000

Answer 1

Answer to Part 1.
Accounts Receivable Turnover = Sales / Average Accounts Receivable
Average Accounts Receivable = ($10,900 + $8,300) / 2
Average Accounts Receivable = $9,600

Accounts Receivable Turnover = $91,200 / $9,600
Accounts Receivable Turnover = 9.50

Answer to Part 2.
Average Collection Period = 365 / Accounts Receivable Turnover
Average Collection Period = 365 / 9.50
Average Collection Period = 38.42 days

Answer to Part 3.
Inventory Turnover = Cost of Goods Sold / Average Inventory
Average Inventory = ($12,200 + $11,500) / 2
Average Inventory = $11,850

Inventory Turnover = $34,365 / $11,850
Inventory Turnover = 2.90

Answer to Part 4.
Average Sale Period = 365 / Inventory Turnover
Average Sale Period = 365 / 2.90
Average Sale Period = 125.86 days

Answer to Part 5.
Operating Cycle = Average Collection Period + Average Sale Period
Operating Cycle = 38.42 + 125.86
Operating Cycle = 164.28 days

Answer to Part 6.
Total Assets Turnover = Sales / Average Total Assets
Average Total Assets = ($94,557 + $71,848) / 2
Average Total Assets = $83,202.50

Total Assets Turnover = $91,200 / $83,202.50
Total Assets Turnover = 1.10