Financial
data for Beaker Company for last year appear below.
Beaker Company
Statement of Financial Position
Statement of Financial Position
Beginning Balance Ending
Balance
Assets
Cash $50,000 $70,000
Accounts
receivable 20,000 25,000
Inventory 30,000 35,000
Plant
and Equipment (net) 120,000 110,000
Investment
in Cedar Company 80,000 100,000
Land
(undeveloped) 170,000 170,000
Total
Assets $470,000 510,000
Liabilities
and Owners' Equity
Accounts
payable $70,000 $90,000
Long-term
debt 250,000 250,000
Owner's
equity 150,000 170,000
Total
liabilities and owner's equity $470,000 $510,000
Beaker
Company
Income
Statement
Sales $414,000
Less
Operating Expenses 351,900
Net
Operating Income 62,100
Less
Interest and Taxes
Interest
Expense $30,000
Tax
Expense 10,000 40,000
Net
Income $22,000
The
company paid dividends of $2,100 last year. The Investment in Cedar Company on
the statement of financial position represents an investment in the stock of
another company.
Required:
i. Compute the company's margin, turnover, and return on investment for last year.
ii. The board of directors of Beaker Company has set a minimum required return of 20%. What was the company's residual income last year? (Points : 15)
Required:
i. Compute the company's margin, turnover, and return on investment for last year.
ii. The board of directors of Beaker Company has set a minimum required return of 20%. What was the company's residual income last year? (Points : 15)
TUTORIAL PREVIEW
(i)
Average operating assets = ($220,000 + $240,000) / 2 = $230,000
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