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 Net sales $1,817,200 Cost of goods sold 1,012,800 Gross profit 804,400 Selling and administrative expenses 516,400 Income from operations 288,000 Other expenses and losses Interest expense 17,700 Income before income taxes 270,300 Income tax expense 80,022 Net income $ 190,278 2019 $1,749,800 970,000 779,800 475,600 304,200 15,000 289,200 77,900 $ 211,300

Answer 1

Answer of Part a:

Average Common Stock = (Beginning Common Stock + Average Common Stock) / 2
Average Common Stock = ($297,400 + $279,200) / 2
Average Common Stock = $288,300

No. of Shares Outstanding = Average Common Stock / price per share
No. of Shares Outstanding = $288,300 / $5
No. of Shares Outstanding = 57,660

Earning per share = Net Income / No. of Shares Outstanding
Earning per share = $190,278 / 57,660
Earning per share = $3.3

Answer of Part b:

Average stockholders Equity = (Beginning Stockholders Equity + Ending Stockholders Equity) / 2
Average Stockholders Equity = ($466,400 + $543,600) / 2
Average Stockholders Equity = $505,000

Return on Common Stockholders Equity = Net Income / Average Common Stockholders Equity
Return on Common Stockholders Equity = $190,278 / $505,000
Return on Common Stockholders Equity = 37.68%

Answer of Part c:

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2
Average Total Assets = ($852,900 + $967,700) / 2
Average Total Assets = $910,300

Return on Assets = Net Income / Average Total Assets
Return on Assets = $190,278 / $910,300
Return on Assets = 20.90%

Answer of Part d:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $371,400 / $204,100
Current Ratio = 1.82

Answer of Part e:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) /2
Average Accounts Receivable = ($102,500 + $116,500) / 2
Average accounts Receivable = $109,500

Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $1,817,200 / $109,500
Accounts Receivable Turnover = 16.6 times

(f)-Average Collection Period

Average Collection Period = 365 Days / Accounts Receivable Turnover

= 365 Days / 16.6 Times

= 21.99 Days

(g)Inventory Turnover

Inventory Turnover = Cost of goods sold / Average Inventory

= $1,012,800 / [($123,300 + 116,000)/2]

= 8.46 Times

(h)-Days in Inventory

Days in Inventory = 365 Days / Inventory Turnover

= 365 Days / 8.46 Times

= 43.14 Days

(i)Times Interest Earned

Times Interest Earned = [ Net Income + Income Tax + Interest ] / Interest Expenses

= [$190,278 + 80,022 + 17,700] / $17,700

= 16.27Times

(j)Asset Turnover

Asset Turnover = Sales / Average Total Assets

= $18,17,200 / [($967,700 + 852,900)/2]

= 1.99 Times

(k)Debt to Asset Ratio

Debt to Asset Ratio = [ Total Debts / Total Assets ] x 100

= [$424,100 / $967,700] x 100

= 43.83%

(l)-Free Cash Flow

Free Cash Flow = Net cash provided by operating activities – Capital Expenditure – Dividend paid

= $249,000 -$145,000 - $94,878

= $9,122

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