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 930,000 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 this year was $24. 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 Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: Land Buildings and equipment, net Total property and equipment Total assets 20 $ 4,038 $ 4,140 15,700 10,400 10,3508 ,720 1,930 2,360 32,018 25,620 EEN 7200 7,3007 ,300 20,500 20,300 27,800 27,600 $59,818 $53,220 $ 4,038 15,700 10, 350 1,930 32,018 $ 4,140 10,400 8,720 2,360 25,620 This Year $92.ece 58,58e 33, see Last Year 587.ee 5 4,58e 32,50 9,8 9.30 Cost of goods sold Grass margin Selling and administrative expenses Selling expenses Addnistrative expenses Total selling and administrative expenses Net operating income Interest expense Net Income before taxes 7,380 20,500 27,800 7,300 20,300 27.600 $59,818 $53, 220 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 Total paid in capital Retained earnings Total stockholders uity Total liabilities and stockholders equity Net income Dividends to common stockholders Net income added to retained earnings Beginning retained earnings Ending retained warnings $10,800 860 $ 8,950 1,350 438 10,730 430 12,098 Required: Compute the following financial data for this year 8.750 20,840 8,750 19,480 1. Gross margin percentage (Round your percentage answer to 1 decimal place lie., 0.1234 should be entered as 12.31. 2. Net profit margin percentage (Round your percentage answer to 1 decimal place le., 0.1234 should be entered as 1 3 Return on total assets. (Round your percentage answer to 1 decimal place ... 0.1234 should be entered as 12. 31.) 4 Return on equity. (Round your percentage answer to 2 decimal places ( ie., 0.1234 should be entered as 12.34. < Prev 2 Pro 4 of 5 Next > tili 930 4,850 5.788 33.198 38,978 $59,818 930 4,850 5,780 27 960 33.740 $53,220 < Prey 4 of 5 Nas

Answer 1

1 Gross Margin percentage 1 2 Net profit margin percentage 3 Return on total assets 4 Return on equity 36.4% 6.1% 18.4% 14.39% Working Notes: 1 Gross margin percentage = Gross Profit/ Sales = $33,500/$92,000 = 36.4% 2 Net profit Margin percentage = Net Income Sales = $5,610/$92,000 = 6.1% 3 Return on total assets = Earning before interest and taxes / Avearge Total assets Avearge total assets= (Beginning total assets +Ending total assets)/2 = ($53,220+$59,818)/2 =$56,519 Return on Total assets = $10,400/$56,519 = 18.4% 4 Return on Equity = Net Income / Shareholders' equity = $5,610/$38,978 = 14.39%