Question: Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, 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 $18. 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 |
$ |
1,280 |
|
$ |
1,560 |
|
| Accounts receivable, net |
|
12,300 |
|
|
9,100 |
|
| Inventory |
|
9,700 |
|
|
8,200 |
|
| Prepaid expenses |
|
1,800 |
|
|
2,100 |
|
|
|
|
|
|
|
|
| Total current assets |
|
25,080 |
|
|
20,960 |
|
|
|
|
|
|
|
|
| Property and equipment: |
|
|
|
|
|
|
| Land |
|
6,000 |
|
|
6,000 |
|
| Buildings and equipment, net |
|
19,200 |
|
|
19,000 |
|
|
|
|
|
|
|
|
| Total property and equipment |
|
25,200 |
|
|
25,000 |
|
|
|
|
|
|
|
|
| Total assets |
$ |
50,280 |
|
$ |
45,960 |
|
|
|
|
|
|
|
|
| Liabilities and Stockholders' Equity |
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
| Accounts payable |
$ |
9,500 |
|
$ |
8,300 |
|
| Accrued liabilities |
|
600 |
|
|
700 |
|
| Notes payable, short term |
|
300 |
|
|
300 |
|
|
|
|
|
|
|
|
| Total current liabilities |
|
10,400 |
|
|
9,300 |
|
| Long-term liabilities: |
|
|
|
|
|
|
| Bonds payable |
|
5,000 |
|
|
5,000 |
|
|
|
|
|
|
|
|
| Total liabilities |
|
15,400 |
|
|
14,300 |
|
|
|
|
|
|
|
|
| Stockholders' equity: |
|
|
|
|
|
|
| Common stock |
|
800 |
|
|
800 |
|
| Additional paid-in capital |
|
4,200 |
|
|
4,200 |
|
|
|
|
|
|
|
|
| Total paid-in capital |
|
5,000 |
|
|
5,000 |
|
| Retained earnings |
|
29,880 |
|
|
26,660 |
|
|
|
|
|
|
|
|
| Total stockholders' equity |
|
34,880 |
|
|
31,660 |
|
|
|
|
|
|
|
|
| Total liabilities and stockholders' equity |
$ |
50,280 |
|
$ |
45,960 |
|
|
|
|
|
|
|
|
|
Weller Corporation
Comparative Income Statement and Reconciliation
(dollars in thousands) |
|
This Year |
Last Year |
| Sales |
$ |
79,000 |
|
$ |
74,000 |
|
| Cost of goods sold |
|
52,000 |
|
|
48,000 |
|
|
|
|
|
|
|
|
| Gross margin |
|
27,000 |
|
|
26,000 |
|
|
|
|
|
|
|
|
| Selling and administrative expenses: |
|
|
|
|
|
|
| Selling expenses |
|
8,500 |
|
|
8,000 |
|
| Administrative expenses |
|
12,000 |
|
|
11,000 |
|
|
|
|
|
|
|
|
| Total selling and administrative expenses |
|
20,500 |
|
|
19,000 |
|
|
|
|
|
|
|
|
| Net operating income |
|
6,500 |
|
|
7,000 |
|
| Interest expense |
|
600 |
|
|
600 |
|
|
|
|
|
|
|
|
| Net income before taxes |
|
5,900 |
|
|
6,400 |
|
| Income taxes |
|
2,360 |
|
|
2,560 |
|
|
|
|
|
|
|
|
| Net income |
|
3,540 |
|
|
3,840 |
|
| Dividends to common stockholders |
|
320 |
|
|
600 |
|
|
|
|
|
|
|
|
| Net income added to retained earnings |
|
3,220 |
|
|
3,240 |
|
| Beginning retained earnings |
|
26,660 |
|
|
23,420 |
|
|
|
|
|
|
|
|
| Ending retained earnings |
$ |
29,880 |
|
$ |
26,660 |
1) Equity Multiplier
2) Gross margin percentage
3) Net profit margin percentage
4) Return on total assests
5) Return of equity