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 $24. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: Land Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Notes payable, short term Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock Additional paid-in capital This Year Last Year $ 1,200 10,600 12,200 660 $ 1,280 6,600 12,200 600 24,660 20,680 9,200 9,200 45,209 43,977 54,409 53,177 $ 79,069 $ 73,857 $ 19,100 1,010 $ 19,200 740 0 20,110 270 20,210 9,800 9,800 29,910 30,010 2,000 2,000 4,000 4,000 Total paid-in capital 6,000 6,000 Retained earnings 43,159 37,847 Total stockholders' equity 49,159 43,847 Total liabilities and stockholders' equity $ 79,069 $ 73,857 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 70,000 $ 66,000 Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes 42,000 36,000 28,000 30,000 11,000 10,400 6,700 6,900 17,700 17,300 10,300 12,700 980 980 9,320 11,720 3,728 4,688 Net income Dividends to common stockholders 5,592 7,032 280 525 Net income added to retained earnings Beginning retained earnings 5,312 37,847 6,507 31,340 Ending retained earnings $ 43,159 $ 37,847 Required: Compute the following financial ratios for this year: 1. Times interest earned ratio. 2. Debt-to-equity ratio. 3. Equity multiplier. Note: For all requirements, round your answers to 2 decimal places. 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
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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 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 $24. All of the company's sales
are on account.
Weller Corporation
Comparative Balance Sheet
(dollars in thousands)
Assets
Current assets:
Cash
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Property and equipment:
Land
Buildings and equipment, net
Total property and equipment
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Long-term liabilities:
Bonds payable
Total liabilities
Stockholders' equity:
Common stock
Additional paid-in capital
This Year Last Year
$ 1,200
10,600
12,200
660
$ 1,280
6,600
12,200
600
24,660
20,680
9,200
9,200
45,209
43,977
54,409
53,177
$ 79,069 $ 73,857
$ 19,100
1,010
$ 19,200
740
0
20,110
270
20,210
9,800
9,800
29,910
30,010
2,000
2,000
4,000
4,000
Total paid-in capital
6,000
6,000
Retained earnings
43,159
37,847
Total stockholders' equity
49,159
43,847
Total liabilities and stockholders' equity
$ 79,069
$ 73,857
Weller Corporation
Comparative Income Statement and Reconciliation
(dollars in thousands)
This Year
Last Year
Sales
$ 70,000
$ 66,000
Cost of goods sold
Gross margin
Selling and administrative expenses:
Selling expenses
Administrative expenses
Total selling and administrative
expenses
Net operating income
Interest expense
Net income before taxes
Income taxes
42,000
36,000
28,000
30,000
11,000
10,400
6,700
6,900
17,700
17,300
10,300
12,700
980
980
9,320
11,720
3,728
4,688
Net income
Dividends to common stockholders
5,592
7,032
280
525
Net income added to retained earnings
Beginning retained earnings
5,312
37,847
6,507
31,340
Ending retained earnings
$ 43,159
$ 37,847
Required:
Compute the following financial ratios for this year:
1. Times interest earned ratio.
2. Debt-to-equity ratio.
3. Equity multiplier.
Note: For all requirements, round your answers to 2 decimal places.
1. Times interest earned ratio
2. Debt-to-equity ratio
3. Equity multiplier
Transcribed Image Text: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 $24. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: Land Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Notes payable, short term Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity: Common stock Additional paid-in capital This Year Last Year $ 1,200 10,600 12,200 660 $ 1,280 6,600 12,200 600 24,660 20,680 9,200 9,200 45,209 43,977 54,409 53,177 $ 79,069 $ 73,857 $ 19,100 1,010 $ 19,200 740 0 20,110 270 20,210 9,800 9,800 29,910 30,010 2,000 2,000 4,000 4,000 Total paid-in capital 6,000 6,000 Retained earnings 43,159 37,847 Total stockholders' equity 49,159 43,847 Total liabilities and stockholders' equity $ 79,069 $ 73,857 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 70,000 $ 66,000 Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes 42,000 36,000 28,000 30,000 11,000 10,400 6,700 6,900 17,700 17,300 10,300 12,700 980 980 9,320 11,720 3,728 4,688 Net income Dividends to common stockholders 5,592 7,032 280 525 Net income added to retained earnings Beginning retained earnings 5,312 37,847 6,507 31,340 Ending retained earnings $ 43,159 $ 37,847 Required: Compute the following financial ratios for this year: 1. Times interest earned ratio. 2. Debt-to-equity ratio. 3. Equity multiplier. Note: For all requirements, round your answers to 2 decimal places. 1. Times interest earned ratio 2. Debt-to-equity ratio 3. Equity multiplier
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