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 the year was $21. 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	$	1,170		$	1,350
Accounts receivable, net		9,300			8,000
Inventory		12,300			10,700
Prepaid expenses		660			590
Total current assets		23,430			20,640
Property and equipment:
Land		9,500			9,500
Buildings and equipment, net		47,008			38,864
Total property and equipment		56,508			48,364
Total assets	$	79,938		$	69,004
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	19,300		$	18,300
Accrued liabilities		1,090			840
Notes payable, short term		160			160
Total current liabilities		20,550			19,300
Long-term liabilities:
Bonds payable		8,600			8,600
Total liabilities		29,150			27,900
Stockholders' equity:
Common stock		600			600
Additional paid-in capital		4,000			4,000
Total paid-in capital		4,600			4,600
Retained earnings		46,188			36,504
Total stockholders' equity		50,788			41,104
Total liabilities and stockholders' equity	$	79,938		$	69,004

Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
	This Year			Last Year
Sales	$	75,000		$	64,000
Cost of goods sold		39,000			37,000
Gross margin		36,000			27,000
Selling and administrative expenses:
Selling expenses		11,100			10,400
Administrative expenses		6,900			6,300
Total selling and administrative expenses		18,000			16,700
Net operating income		18,000			10,300
Interest expense		860			860
Net income before taxes		17,140			9,440
Income taxes		6,856			3,776
Net income		10,284			5,664
Dividends to common stockholders		600			600
Net income added to retained earnings		9,684			5,064
Beginning retained earnings		36,504			31,440
Ending retained earnings	$	46,188		$	36,504

Required:

Compute the following financial data and ratios for this year:

1. Working capital. (Enter your answer in thousands.)

2. Current ratio. (Round your answer to 2 decimal places.)

3. Acid-test ratio. (Round your answer to 2 decimal places.)

Answer 1

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