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Financial data for
Beaker Company
for last year appear below.
|
Statement of Financial Position |
|||
|
Beginning |
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 |
1 |
10,000 |
|
Investment in Cedar Company |
80,000 |
100,000 |
|
|
Land (undeveloped) |
170,000 |
||
|
Total Assets |
$470,000 |
510,000 |
|
|
Liabilities and Owners’ Equity |
|||
|
Accounts payable |
$90,000 |
||
|
Long-term debt |
250,000 |
||
|
Owner’s equity |
150,000 |
||
|
Total liabilities and owner’s equity |
$510,000 |
|
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 |
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?
