Exercise 14-11 Wiemers Corporation\'s comparative balance sheets are presented b
ID: 2580924 • Letter: E
Question
Exercise 14-11 Wiemers Corporation's comparative balance sheets are presented below. WIEMERS CORPORATION Balance Sheets December 31 2015 Cash Accounts receivable (net) Inventory Land Buildings Accumulated depreciation- building:s $ 3,960 21,130 10,260 19,920 70,410 2014 $ 3,330 23,230 6,830 25,710 70,410 (10,570 ) (15,020 ) $110,660 $ 12,360 75,520 22,780 $110,660 $118,940 Total Accounts payable Common stock Retained earnings $31,070 68,060 19,810 Total $118,940 Wiemers's 2015 income statement included net sales of $109,120, cost of goods sold of $60,840, and net income of $15,760.Explanation / Answer
(a)Current ratio = Current Assets / Current Liabilities
Current Assets = Cash + Accounts receivable + Inventory
= 3,960 + 21,130 + 10,260
Current Assets = 35,350
Current Liabilities = Accounts Payables = 12,360
Current ratio = 35,350 / 12,360
Current Ratio = 2.86 Times
(b)Acid Test Ratio = Liquid Assets / Current Liabilities
Liquid Assets =Current Assets – Inventory
= 35,350 - 10,260
Liquid Assets = 25,090
Acid Test Ratio = 25,090 / 12,360
Acid Test Ratio = 2.03 Times
(c)Accounts receivable turnover ratio = Net Credit Sales / Average Accounts Receivable
We are assuming that all Sales are credit.
Average Accounts Receivable = (Last year Accounts Receivable + Current year Accounts Receivable) / 2
= (23,230 +21,130) / 2
Average Accounts Receivable = 22,180
Accounts receivable turnover ratio = 109,120 / 22,180
Accounts receivable turnover ratio = 4.92 Times
(d)Inventory Turnover ratio = Cost of Goods Sold / Average Stock
COGS = 60,840
Average Stock = (Opening Stock + Closing Stock) / 2
= (6830 + 10,260) / 2
Average Stock = 8545
Inventory Turnover Ratio = 60,840 / 8545
Inventory Turnover Ratio = 7.12 times
(e)Profit Margin ratio = (Net Income / Total Sales) * 100
= (15,760 / 109,120) * 100
Profit Margin ratio = 14.44%
(f)Asset Turnover ratio = Net Sales / Net Fixed Assets
Net Fixed Assets = Total fixed Asset – Accumulated Depreciation
= 90,330 – 15,020
Net Fixed Assets = 75,310
Asset Turnover ratio = 109,120 / 75,310
Asset Turnover ratio = 1.45 times
(g)Return on Assets = Net Income / Average Total Assets (Gross)
For calculation of Total fixed assets we will take Gross Fixed Assets
Average Total Assets = (Opening total Assets + closing total assets) / 2
= (129,510 + 125,680) / 2
Average Total Assets = 127,595
Return on Assets = 15,760 / 127,595
Return on Assets = 12.35%
(h)Return on Common stockholder’s equity = Net Income / Average stockholder’s equity
Stockholder’s equity = Common Stock + Retained Earning
Average stockholder’s equity = (Opening stockholder’s equity + Closing stockholder’s equity) / 2
= (87,870 +98,300) /2
Average stockholder’s equity = 93,085
Return on Common stockholder’s equity = 15,760 / 93,085
Return on Common stockholder’s equity = 16.93%
(i)There will be no debt-equity ratio as there is no debt in the company.
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