Financial data for Snape Company for last year appears below: Snape Company Statements of Financial Position Beginning
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Question:
Financial data for Snape Company for last year appears below:
Snape Company | ||
Statements of Financial Position | ||
Beginning Balance | Ending Balance | |
Assets: | ||
Cash | $58,000 | $78,000 |
Accounts receivable | 28,000 | 27,000 |
Inventory | 36,000 | 40,000 |
Plant and equipment (net) | 123,000 | 113,000 |
Investment in Potter Company | 82,000 | 102,000 |
Land (underdeveloped) | 170,000 | 170,000 |
Total assets | $497,000 | $530,000 |
Liabilities and owners' equity: | ||
Accounts payable | $57,000 | $70,000 |
Long-term debt | 270,000 | 270,000 |
Owners' equity | 170,000 | 190,000 |
Total liabilities and owners' equity | $497,000 | $530,000 |
Snape Company | ||
Income Statement | ||
Sales | $413,000 | |
Less operating expenses | 352,000 | |
Net operating income | 61,000 | |
Less interest and taxes: | ||
Interest expense | $30,000 | |
Tax expense | 13,000 | 43,000 |
Operating Income | $18,000 |
The company paid dividends of $2,000 last year. The "Investment in Potter Company" on the statement of financial position represents an investment in the stock of another company.
Required:
- Compute the company's margin, turnover, and return on investment for last year.
- The Board of Directors of Snape Company have set a minimum required return of 20%. 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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