Financial data for Beaker Company for last year appear below: Beaker Company Statements of Financial Position Beginning
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Question:
Financial data for Beaker Company for last year appear below:
Beaker Company | ||||||||||||
Statements of Financial Position | ||||||||||||
Beginning Balance | Ending Balance | |||||||||||
Assets: | ||||||||||||
Cash | $ | 295,000 | $ | 336,524 | ||||||||
Accounts receivable | 178,000 | 180,000 | ||||||||||
Inventory | 275,000 | 222,000 | ||||||||||
Plant and equipment (net) | 480,000 | 441,000 | ||||||||||
Investment in Cedar Company | 306,000 | 322,000 | ||||||||||
Land (undeveloped) | 273,000 | 273,000 | ||||||||||
Total assets | $ | 1,807,000 | $ | 1,774,524 | ||||||||
Liabilities and owners' equity: | ||||||||||||
Accounts payable | $ | 224,000 | $ | 197,000 | ||||||||
Long-term debt | 824,000 | 824,000 | ||||||||||
Owners' equity | 759,000 | 753,524 | ||||||||||
Total liabilities and owners' equity | $ | 1,807,000 | $ | 1,774,524 | ||||||||
Beaker Company | |||||||||||
Income Statement | |||||||||||
Sales | $ | 2,480,000 | |||||||||
Less operating expenses | 2,033,600 | ||||||||||
Net operating income | 446,400 | ||||||||||
Less interest and taxes: | |||||||||||
Interest expense | $ | 99,100 | |||||||||
Tax expense | 151,776 | 250,876 | |||||||||
Net income | $ | 195,524 | |||||||||
The company paid dividends of $201,000 last year. The "Investment in Cedar Company" on the statement of financial position represents an investment in the stock of another company.
Required:
a. Compute the company's margin, turnover, and return on investment for last year.
b. The Board of Directors of Beaker Company has set a minimum required return of 34%. What was the company's residual income last year?
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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