Problem 10-15 (Algo) Return on Investment (ROI) and Residual Income (LO10-1, LO10-2] Financial data for Joel de Paris, Incorporated, for last year follow: Ending Balance Joel de Paris, Incorporated Balance Sheet Beginning Balance Assets Cash $ 128,000 Accounts receivable 339,000 Inventory 570,000 Plant and equipment, net 823,000 Investment in Buisson, S.A. 393,000 Land (undeveloped) 249,000 Total assets $ 2,502,000 Liabilities and Stockholders' Equity Accounts payable $ 375,000 Long-term debt 1,015,000 Stockholders' equity 1,112,000 Total liabilities and stockholders' equity $ 2,502,000 $ 139,000 478,000 471,000 812,000 432,000 249,000 $ 2,581,000 $ 349,000 1,015,000 1,217,000 $ 2,581,000 Joel de Paris, Incorporated Income Statement Sales $ 3,948,000 Operating expenses 3,355,800 Net operating income 592,200 Interest and taxes: Interest expense $ 122,000 Tax expense 198,000 320,000 Net income $ 272,200 The company paid dividends of $167,200 last year. The "Investment in Buisson, S.A.," on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%. Required: 1. Compute the company's average operating assets for last year. 2. Compute the company's margin, turnover, and return on investment (ROI) for last year. (Do not round intermediate calculations and round your final answers to 2 decimal places.) 3. What was the company's residual income last year? 1. Average operating assets 2. Margin % Assets Cash Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A. Land (undeveloped) Total assets Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity Total liabilities and stockholders' equity _ $ 128,000 339,000 570,000 823,000 393,000 249,000 $ 2,502,000 $ 139,000 478,000 471,000 812,000 432,000 249,000 $ 2,581,000 $ 375,000 1,015, 000 1,112,000 $ 2,502,000 $ 349,000 1,015,000 1,217,000 $ 2,581,000 Joel de Paris, Incorporated Income Statement Sales $ 3,948,000 Operating expenses 3,355,800 Net operating income 592,200 Interest and taxes: Interest expense $ 122,000 Tax expense 198,000 320,000 Net income $ 272,200 The company paid dividends of $167,200 last year. The "Investment in Buisson, S.A.," on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%. Required: 1. Compute the company's average operating assets for last year. 2. Compute the company's margin, turnover, and return on investment (ROI) for last year. (Do not round intermediate calculations and round your final answers to 2 decimal places.) 3. What was the company's residual income last year? % 1. Average operating assets 2. Margin 2. Turnover 2. ROI % 3. Residual income
