*THE YEARS=2019 IS THE FIRST COLUMN AND 2018 IS THE SECOND COLUMN All sales were

Question

*THE YEARS=2019 IS THE FIRST COLUMN AND 2018 IS THE SECOND COLUMN

All sales were on account. Net cash provided by operating activities for 2019 was $220,000. Capital expenditures were $136,000, and cash dividends were $70,000.

Instructions

Compute the following ratios for 2019.

(a)  

Earnings per share.

(b)  

Return on common stockholders' equity.

(c)  

Return on assets.

(d)  

Current ratio.

(e)  

Accounts receivable turnover.

(f)  

Average collection period.

(g)  

Inventory turnover.

(h)  

Days in inventory.

(i)  

Times interest earned.

(j)  

Asset turnover.

(k)  

Debt to assets ratio.

The comparative statements of Wahlberg Company are presented here. WAHLBERG COMPANY Income Statements For the Years Ended December 31 2017 2016 Net sales Cost of goods sold Gross profit Selling and administrative expenses Income from operations Other expenses and losses $1,890,540 1,058,540 832,000 500,000 332,000 $1,750,500 1,006,000 744,500 479,000 265,500 Interest expense Income before income taxes Income tax expense Net income 22,000 310,000 92,000 218,000 20,000 245,500 73,000 172,500 WAHLBERG COMPANY Balance Sheets December 31 2017 2016 Current assets 60,100 74,000 117,800 126,000 377,900 649,000 1,026,900 S 64,200 50,000 102,800 115,500 332,500 520,300 $852,800 Debt investments (short-term) Accounts receivable Total current assets Plant assets (net) Liabilities and Stockholders' Equity Current liabilities 2017 2016 Accounts payable Income taxes payable $160,000 43,500 203,500 220,000 423,500 $145,400 42,000 187,400 200,000 387,400 Total current liabilities Bonds payable Total liabilities Stockholders' equity 300,000 165,400 465,400 $852,800 Common stock ($5 par) 290,000 313,400 603,400 $1,026,900 Retained earnings Total stockholders' equity Total liabilities and stockholders' equity

Explanation / Answer

Solutions

(218000-0)/58000*=3.76

*290000/5=58000

(218000-0)/534400*=40.79%

*(465400+603400)/2=534400

218000/939850*=23.20%

*(852800+1026900)/2=939850

1890540/110300*=17.14

*(102800+117800)/2=110300

1058540/120750*=8.77

*(115500+126000)/2=120750

1890540/939850*=2.01

*(852800+1026900)/2=939850

S.No Formula Ratio a. Earnings per share=Net Income – Preferred dividends/Weighted Average Number of Common Shares Outstanding

(218000-0)/58000*=3.76

*290000/5=58000

b Return on common stockholders’ equity= Net Income-Preferred Dividend/Average common stockholders’ equity

(218000-0)/534400*=40.79%

*(465400+603400)/2=534400

c Return on total assets= Net Income/Average Total Asset

218000/939850*=23.20%

*(852800+1026900)/2=939850

d Current ratio = Current Asset/Current Liablities 377900/203500=1.86 e Account Receivable Turnover Ratio=Net Credit Sales/Average Accounts Receivable

1890540/110300*=17.14

*(102800+117800)/2=110300

f Average collection period=365/Account Receivable Turnover Ratio 365/17.14=21.30 days g Inventory turnover= Cost of Goods Sold/Average Inventory

1058540/120750*=8.77

*(115500+126000)/2=120750

h Number of days’ sales in inventory=Ending Inventory/Cost of Goods Sold*365 (126000/1058540)*365=43days i Times interest earned= Eaning before interest and Tax expense/Interest expense 332000/22000=15.09 j Asset turnover=Net Sales/Average Total Asset

1890540/939850*=2.01

*(852800+1026900)/2=939850

k Debt to Total Asset Ratio=Total Debt OR Total Liability/Total Assets 423500/1026900=0.41

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