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 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 $0.40 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
Required:
Compute the following financial data for this year:
A. Earnings per share. (Round your answer to 2 decimal places.)
B. Price-earnings ratio. (Round your intermediate calculations and final answer to 2 decimal places.)
C. Dividend payout ratio. (Round your intermediate calculations and final answer to 2 decimal places.)
D. Dividend yield ratio. (Round your intermediate calculations and final answer to 2 decimal places.)
E. Book value per share. (Round your answer to 2 decimal places.)

Weller Corporation

Computation of the financial data for this year:

A. Earnings per share = Net Income/No. of outstanding shares

= $3,540,000/800,000

= $4.43

B. Price-earnings ratio = Market value of share / Earnings per share

= $18/$4.43

= 4.06 times

C. Dividend Payout Ratio = Dividend per share/Earnings per share

= $0.40/$4.43

= 0.09 = 9%

D. Dividend yield ratio = Dividend per share/Market price per share

= $0.40/$18

= 0.02 = 2%

E. Book value per share = Common Equity / No. of outstanding shares

= $34,880,000/800,000

= $43.60

Explanation:

a) Data and Calculations:

1. 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

Long-term assets:

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

2. 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

3. Other information:

a. Common stock, outstanding 800,000 shares

b. Interest rate on the bonds =12%.

c. Income tax rate was 40%

d. Dividend per share of common stock was $0.40

e. Market value of the company’s common stock at the end of the year was $18.

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