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 $29. 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 $ 1,250 $ 1,300 Accounts receivable, net 9,500 7,300 Inventory 12,100 11,500 Prepaid expenses 740 600 Total current assets 23,590 20,700 Property and equipment: Land 9,500 9,500 Buildings and equipment, net 49,553 42,999 Total property and equipment 59,053 52,499 Total assets $ 82,643 $ 73,199 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 18,900 $ 18,200 Accrued liabilities 1,000 790 Notes payable, short term 0 210 Total current liabilities 19,900 19,200 Long-term liabilities: Bonds payable 9,600 9,600 Total liabilities 29,500 28,800 Stockholders' equity: Common stock 2,000 2,000 Additional paid-in capital 4,000 4,000 Total paid-in capital 6,000 6,000 Retained earnings 47,143 38,399 Total stockholders' equity 53,143 44,399 Total liabilities and stockholders' equity $ 82,643 $ 73,199 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 73,000 $ 65,000 Cost of goods sold 39,000 34,000 Gross margin 34,000 31,000 Selling and administrative expenses: Selling expenses 10,900 10,000 Administrative expenses 7,100 6,900 Total selling and administrative expenses 18,000 16,900 Net operating income 16,000 14,100 Interest expense 960 960 Net income before taxes 15,040 13,140 Income taxes 6,016 5,256 Net income 9,024 7,884 Dividends to common stockholders 280 525 Net income added to retained earnings 8,744 7,359 Beginning retained earnings 38,399 31,040 Ending retained earnings $ 47,143 $ 38,399 Required: Compute the following financial ratios for this year: 1. Times interest earned ratio. 2. Debt-to-equity ratio. 3. Equity multiplier.

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 $29. 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 $ 1,250 $ 1,300 Accounts receivable, net 9,500 7,300 Inventory 12,100 11,500 Prepaid expenses 740 600 Total current assets 23,590 20,700 Property and equipment: Land 9,500 9,500 Buildings and equipment, net 49,553 42,999 Total property and equipment 59,053 52,499 Total assets $ 82,643 $ 73,199 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 18,900 $ 18,200 Accrued liabilities 1,000 790 Notes payable, short term 0 210 Total current liabilities 19,900 19,200 Long-term liabilities: Bonds payable 9,600 9,600 Total liabilities 29,500 28,800 Stockholders' equity: Common stock 2,000 2,000 Additional paid-in capital 4,000 4,000 Total paid-in capital 6,000 6,000 Retained earnings 47,143 38,399 Total stockholders' equity 53,143 44,399 Total liabilities and stockholders' equity $ 82,643 $ 73,199 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 73,000 $ 65,000 Cost of goods sold 39,000 34,000 Gross margin 34,000 31,000 Selling and administrative expenses: Selling expenses 10,900 10,000 Administrative expenses 7,100 6,900 Total selling and administrative expenses 18,000 16,900 Net operating income 16,000 14,100 Interest expense 960 960 Net income before taxes 15,040 13,140 Income taxes 6,016 5,256 Net income 9,024 7,884 Dividends to common stockholders 280 525 Net income added to retained earnings 8,744 7,359 Beginning retained earnings 38,399 31,040 Ending retained earnings $ 47,143 $ 38,399 Required: Compute the following financial ratios for this year: 1. Times interest earned ratio. 2. Debt-to-equity ratio. 3. Equity multiplier.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

	This Year	Last Year
Weller Corporation Comparative Balance Sheet (dollars in thousands)
Assets
Current assets:
Cash	$ 1,250	$ 1,300
Accounts receivable, net	9,500	7,300
Inventory	12,100	11,500
Prepaid expenses	740	600
Total current assets	23,590	20,700
Property and equipment:
Land	9,500	9,500
Buildings and equipment, net	49,553	42,999
Total property and equipment	59,053	52,499
Total assets	$ 82,643	$ 73,199
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 18,900	$ 18,200
Accrued liabilities	1,000	790
Notes payable, short term	0	210
Total current liabilities	19,900	19,200
Long-term liabilities:
Bonds payable	9,600	9,600
Total liabilities	29,500	28,800
Stockholders' equity:
Common stock	2,000	2,000
Additional paid-in capital	4,000	4,000
Total paid-in capital	6,000	6,000
Retained earnings	47,143	38,399
Total stockholders' equity	53,143	44,399
Total liabilities and stockholders' equity	$ 82,643	$ 73,199

	This Year	Last Year
Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands)
Sales	$ 73,000	$ 65,000
Cost of goods sold	39,000	34,000
Gross margin	34,000	31,000
Selling and administrative expenses:
Selling expenses	10,900	10,000
Administrative expenses	7,100	6,900
Total selling and administrative expenses	18,000	16,900
Net operating income	16,000	14,100
Interest expense	960	960
Net income before taxes	15,040	13,140
Income taxes	6,016	5,256
Net income	9,024	7,884
Dividends to common stockholders	280	525
Net income added to retained earnings	8,744	7,359
Beginning retained earnings	38,399	31,040
Ending retained earnings	$ 47,143	$ 38,399