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Wiemers Corporation’s comparative balance sheets are presented below. WIEMERS CORPORATION Balance Sheets December 31 2017 2016...

Wiemers Corporation’s comparative balance sheets are presented below.

WIEMERS CORPORATION
Balance Sheets
December 31

2017

2016
Cash $ 4,100 $ 4,100
Accounts receivable (net) 20,900 23,200
Inventory 10,400 7,500
Land 19,900 26,000
Buildings 69,500 69,500
Accumulated depreciation—buildings (14,700 ) (10,400 )
    Total $110,100 $119,900
Accounts payable $ 12,300 $ 31,600
Common stock 74,500 70,500
Retained earnings 23,300 17,800
    Total $110,100 $119,900


Wiemers’s 2017 income statement included net sales of $109,000, cost of goods sold of $59,500, and net income of $14,300.

Compute the following ratios for 2017.  (Round answers to 2 decimal places, e.g. 1.65, or 1.65% .)

Current ratio :1
Acid-test ratio :1
Accounts receivable turnover times
Inventory turnover times
Profit margin %
Asset turnover times
Return on assets %
Return on common stockholders’ equity %
Debt to assets ratio %

Solutions

Expert Solution

Answer -

Current ratio = 2.88:1

Acid-test ratio = 2.03:1

Accounts receivable turnover = 4.94 times

Inventory turnover = 6.65 times

Profit margin = 13.12%

Assets turnover = 0.95 times

Return on assets = 12.43%

Return on common stockholders’ equity = 15.37%

Debt to assets ratio = 11.17%

Calculation:

1. Current ratio:

Here,

Current assets = Cash + Accounts receivable + Inventory

= $4100 + $20900 + $10400

= $35400

Current liabilities = Accounts payable

= $12300

Therefore,

Current ratio = Current assets / Current liabilities

= $35400 / $12300

= 2.88:1

2. Acid-test ratio:

Acid-test ratio = (Cash + Accounts receivable) / Current liabilities

= ($4100 + $20900) / $12300

= 2.03:1

3. Accounts receivable turnover:

Here,

Average accounts receivable = (Accounts receivable at December 31, 2016 + Accounts receivable at December 31, 2017) / 2

= ($23200 + $20900) / 2

= $22050

Therefore,

Accounts receivable turnover = Net sales / Average accounts receivable

= $109000 / $22050

= 4.94 times

4. Inventory turnover:

Here,

Average inventory = (Inventory at December 31, 2016 + Inventory at December 31, 2017) / 2

= ($7500 + $10400) / 2

= $8950

Therefore,

Inventory turnover = Cost of goods sold / Average inventory

= $59500 / $8950

= 6.65 times

5. Profit margin:

Profit margin = (Net income / Net sales) * 100

= ($14300 / $109000) * 100

= 13.12%

6. Assets turnover:

Average total assets = (Total assets at December 31, 2016 + Total assets at December 31, 2017) / 2

= ($119900 + $110100) / 2

= $115000

Therefore,

Assets turnover = Net sales / Average total assets

= $109000 / $115000

= 0.95 times

7. Return on assets:

Return on assets = (Net income / Average total assets) * 100

= ($14300 / $115000) * 100

= 12.43%

8. Return on common stockholders’ equity:

Here,

Common stockholders’ equity at December 31, 2016:

= Common stock + Retained earnings

= 70500 + $17800

= $88300

Common stockholders’ equity at December 31, 2017:

= Common stock + Retained earnings

= 74500 + $23300

= $97800

Now,

Average common stockholders’ equity = (Common stockholders’ equity at December 31, 2016 + Common stockholders’ equity at December 31, 2017) / 2

= ($88300 + $97800) / 2

= $93050

Return on common stockholders’ equity = (Net income / Average common stockholders’ equity) * 100

= ($14300 / $93050) * 100

= 15.37%

9. Debt to assets ratio:

Here,

Debt = Accounts payable

= $12300

Debt to assets ratio = (Debt / Total assets) * 100

= ($12300 / $110100) * 100

= 11.17%

ekkarill92 answered 1 year ago
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