Assets Current assets: Cash $ 5,304 $ 5,350 Accounts receivable, net 15,800 10,450 Inventory 10,400 8,760 Prepaid expenses 1,940 2,380 Total current assets 33,444 26,940 Property and equipment: Land 7,400 7,400 Buildings and equipment, net 20,600 20,400 Total property and equipment 28,000 27,800 Total assets $ 61,444 $ 54,740 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 10,900 $ 9,000 Accrued liabilities 880 1,400 Notes payable, short term 440 440 Total current liabilities 12,220 10,840 Long-term liabilities: Bonds payable 10,000 10,000 Total liabilities 22,220 20,840 Stockholders' equity: Common stock 940 940 Additional paid-in capital 4,900 4,900 Total paid-in capital 5,840 5,840 Retained earnings 33,384 28,060 Total stockholders' equity 39,224 33,900 Total liabilities and stockholders' equity $ 61,444 $ 54,740 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $ 93,000 $ 88,000 Cost of goods sold 59,000 55,000 Gross margin 34,000 33,000 Selling and administrative expenses: Selling expenses 9,900 9,400 Administrative expenses 13,400 12,400 Total selling and administrative expenses 23,300 21,800 Net operating income 10,700 11,200 Interest expense 1,200 1,200 Net income before taxes 9,500 10,000 Income taxes 3,800 4,000 Net income 5,700 6,000 Dividends to common stockholders 376 752 Net income added to retained earnings 5,324 5,248 Beginning retained earnings 28,060 22,812 Ending retained earnings $ 33,384 $ 28,060 Required: Compute the following financial data for this year: 1. Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 2. Net profit margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 3. Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 4. Return on equity. (Round your percentage answer to 2 decimal places (i.e., 0.1234
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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 940,000 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 $25. 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 | $ 5,304 | $ 5,350 |
| Accounts receivable, net | 15,800 | 10,450 |
| Inventory | 10,400 | 8,760 |
| Prepaid expenses | 1,940 | 2,380 |
| Total current assets | 33,444 | 26,940 |
| Property and equipment: | ||
| Land | 7,400 | 7,400 |
| Buildings and equipment, net | 20,600 | 20,400 |
| Total property and equipment | 28,000 | 27,800 |
| Total assets | $ 61,444 | $ 54,740 |
| Liabilities and |
||
| Current liabilities: | ||
| Accounts payable | $ 10,900 | $ 9,000 |
| Accrued liabilities | 880 | 1,400 |
| Notes payable, short term | 440 | 440 |
| Total current liabilities | 12,220 | 10,840 |
| Long-term liabilities: | ||
| Bonds payable | 10,000 | 10,000 |
| Total liabilities | 22,220 | 20,840 |
| Stockholders' equity: | ||
| Common stock | 940 | 940 |
| Additional paid-in capital | 4,900 | 4,900 |
| Total paid-in capital | 5,840 | 5,840 |
| Retained earnings | 33,384 | 28,060 |
| Total stockholders' equity | 39,224 | 33,900 |
| Total liabilities and stockholders' equity | $ 61,444 | $ 54,740 |
| Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) |
||
| This Year | Last Year | |
|---|---|---|
| Sales | $ 93,000 | $ 88,000 |
| Cost of goods sold | 59,000 | 55,000 |
| Gross margin | 34,000 | 33,000 |
| Selling and administrative expenses: | ||
| Selling expenses | 9,900 | 9,400 |
| Administrative expenses | 13,400 | 12,400 |
| Total selling and administrative expenses | 23,300 | 21,800 |
| Net operating income | 10,700 | 11,200 |
| Interest expense | 1,200 | 1,200 |
| Net income before taxes | 9,500 | 10,000 |
| Income taxes | 3,800 | 4,000 |
| Net income | 5,700 | 6,000 |
| Dividends to common stockholders | 376 | 752 |
| Net income added to retained earnings | 5,324 | 5,248 |
| Beginning retained earnings | 28,060 | 22,812 |
| Ending retained earnings | $ 33,384 | $ 28,060 |
Required:
Compute the following financial data for this year:
1. Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
2. Net profit margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
3. Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
4. Return on equity. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)
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