afari File Edit View History Bookmarks Window Help ezto.mheducation.com Comparat
ID: 2583931 • Letter: A
Question
afari File Edit View History Bookmarks Window Help ezto.mheducation.com 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 bonds, which were sold at their face value, 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 Comparative Balance Sheet (dollars in thousands) This Year Last Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses $ 1,280 $1,560 12,300 9,100 9,700 8,200 1,800 2,100 Total current assets 25,08020,960 Property and equipment Land 6,000 6,000 Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders' Equity 19,200 19,000 25,200 25,000 $50,280 $45,960 Current liabilities: Accounts payable Accrued iabilities Notes payable, short term $ 9,500 8,300 700 300 600 300 10,4009,300 5,0005,000 15,40014,300 Total current liabilities Long-term liabilities Bonds payable Total liabilities Stockholders' equity: Common stock Additional paid-in capital 800 4,200 800 4,200 Total paid-in capital Retained earnings 5,000 5,000 29,880 26,660 34.880 31,660 $50,280 $45,960 Total stockholders' equity Total liabilities and stockholders' equity 2Explanation / Answer
Working capital = current assets-current liabilities
= 25080-10400
Working capital = 14680
Current ratio = current assets/current liabilities
= 25080/10400
Current ratio = 2.41:1
Acid test ratio = (cash+account receivable) /current liabilities
= (1280+12300)/10400
Acid test ratio = 1.31:1
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