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2

A division's operating data for the past two years is as follows:

	Year 1	Year 2
Return on investment	14%	18%
Net operating income	?	$180,000
Turnover	?	2
Margin	?	?
Sales	$1,000,000	?

In Year 2 the margin was twice as much as the margin in Year 1. How much was the divisions Net Operating Income for Year 1?

Multiple Choice

• $180,000

• $140,000

• $45,000

• $90,000

3. Financial data for Guyer Corporation, for last year follow:

Guyer Corporation Balance Sheet
	Beginning Balance			Ending Balance
Assets
Cash	$	140,000		$	120,000
Accounts receivable		450,000			530,000
Inventory		320,000			380,000
Plant and equipment, net		680,000			680,000
Investment in ABC, Inc.		250,000			280,000
Land (undeveloped)		180,000			170,000
Total assets	$	2,020,000		$	2,160,000
Liabilities and Stockholders' Equity
Accounts payable	$	360,000		$	310,000
Long-term debt		1,500,000			1,500,000
Stockholders' equity		160,000			350,000
Total liabilities and stockholders' equity	$	2,020,000		$	2,160,000

Guyer Corporation Income Statement
Sales					$	4,050,000
Operating expenses						3,630,000
Net operating income						420,000
Interest and taxes:
Interest expense	$	150,000
Tax expense		110,000				260,000
Net income					$	160,000

The company paid dividends of $15,000 last year. The Investment in ABC, Inc. on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 9%.

What was the companys residual income last year?

Multiple Choice

• $-34,400

• $225,600

• $271,500

• $11,500