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Financial data for Beaker Company for last year appear below: Beaker Company Statements of Financial Position Beginning Balance Ending Balance Assets: Cash $ 260,000 $
Financial data for Beaker Company for last year appear below:
Beaker Company | |||||||||||
Statements of Financial Position | |||||||||||
Beginning Balance | Ending Balance | ||||||||||
Assets: | |||||||||||
Cash | $ | 260,000 | $ | 217,450 | |||||||
Accounts receivable | 157,000 | 149,000 | |||||||||
Inventory | 288,000 | 284,000 | |||||||||
Plant and equipment (net) | 496,000 | 450,000 | |||||||||
Investment in Cedar Company | 233,000 | 347,000 | |||||||||
Land (undeveloped) | 335,000 | 335,000 | |||||||||
Total assets | $ | 1,769,000 | $ | 1,782,450 | |||||||
Liabilities and owners' equity: | |||||||||||
Accounts payable | $ | 213,000 | $ | 171,000 | |||||||
Long-term debt | 803,000 | 803,000 | |||||||||
Owners' equity | 753,000 | 808,450 | |||||||||
Total liabilities and owners' equity | $ | 1,769,000 | $ | 1,782,450 | |||||||
Beaker Company | |||||||||||
Income Statement | |||||||||||
Sales | $ | 2,500,000 | |||||||||
Less operating expenses | 1,925,000 | ||||||||||
Net operating income | 575,000 | ||||||||||
Less interest and taxes: | |||||||||||
Interest expense | $ | 96,300 | |||||||||
Tax expense | 224,250 | 320,550 | |||||||||
Net income | $ | 254,450 | |||||||||
The company paid dividends of $199,000 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 45%. What was the company's residual income last year?
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