Financial data for Beaker Company for last year appear below. Beaker Company Statement of Financial Position Beginning
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Question:
Financial data for Beaker Company for last year appear below.
Beaker Company | ||
Statement of Financial Position | ||
| | |
| Beginning | Ending |
| Balance | 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?
Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
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