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 $24. All of the company's sales are on account.Required:Compute the following financial ratios for this year:1. Times interest earned ratio.2. Debt-to-equity ratio.3. Equity multiplier. Weller CorporationComparative Balance Sheet(dollars in thousands)This Year Last YearAssetsCurrent assets:$ 1,190$ 1,2500ר ,ר11,300CashAccounts receivable, net10,10013,900InventoryPrepaid expenses660620Total current assets25,85020,870Property and equipment:Land9,1009,10048,06657,166Buildings and equipment, net41,028Total property and equipment50,128Total assets$83,016$70,998Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable$18,9001,060$17,400Accrued liabilities860Notes payable, short term140Total current liabilities19,96018,400Long-term liabilities:Bonds payable9,7009,700Total liabilities29,66028,100Stockholders' equity:2,0004,000Common stock2,0004,000Additional paid-in capitalTotal paid-in capitalRetained earnings6,00047,35653,3566,00036,898Total stockholders' equity42,898Total liabilities and stockholders' equity$83,016$70,998 Weller CorporationComparative Income Statement and Reconciliation(dollars in thousands)This Year Last YearSales$72,000Cost of goods soldGross margin$65,00038,00027,00036,00036,000Selling and administrative expenses:Selling expenses10,5006,10010,6006, 60017,20018,800Administrative expenses16,600Total selling and administrative expensesNet operating incomeInterest expenseNet income before taxes10,4009709709,4303,77217,830Income taxes7,132Net income10,6985,658Dividends to common stockholders240300Net income added to retained earnings10,45836,8985,35831,540Beginning retained earningsEnding retained earnings$47,356$36,898

Times interest earned ratio refers to ratio that measures the debt obligations meeting ability of a…

Answered: Comparative financial statements for…

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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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 $24. All of the company's sales are on account.

Required:
Compute the following financial ratios for this year:

1. Times interest earned ratio.
2. Debt-to-equity ratio.
3. Equity multiplier.

Weller Corporation
Comparative Balance Sheet
(dollars in thousands)
This Year Last Year
Assets
Current assets:
$ 1,190
$ 1,250
0ר ,ר
11,300
Cash
Accounts receivable, net
10,100
13,900
Inventory
Prepaid expenses
660
620
Total current assets
25,850
20,870
Property and equipment:
Land
9,100
9,100
48,066
57,166
Buildings and equipment, net
41,028
Total property and equipment
50,128
Total assets
$83,016
$70,998
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$18,900
1,060
$17,400
Accrued liabilities
860
Notes payable, short term
140
Total current liabilities
19,960
18,400
Long-term liabilities:
Bonds payable
9,700
9,700
Total liabilities
29,660
28,100
Stockholders' equity:
2,000
4,000
Common stock
2,000
4,000
Additional paid-in capital
Total paid-in capital
Retained earnings
6,000
47,356
53,356
6,000
36,898
Total stockholders' equity
42,898
Total liabilities and stockholders' equity
$83,016
$70,998

Weller Corporation
Comparative Income Statement and Reconciliation
(dollars in thousands)
This Year Last Year
Sales
$72,000
Cost of goods sold
Gross margin
$65,000
38,000
27,000
36,000
36,000
Selling and administrative expenses:
Selling expenses
10,500
6,100
10,600
6, 600
17,200
18,800
Administrative expenses
16,600
Total selling and administrative expenses
Net operating income
Interest expense
Net income before taxes
10,400
970
970
9,430
3,772
17,830
Income taxes
7,132
Net income
10,698
5,658
Dividends to common stockholders
240
300
Net income added to retained earnings
10,458
36,898
5,358
31,540
Beginning retained earnings
Ending retained earnings
$47,356
$36,898

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