| Beaker Company |
| Statement of Financial Position |
| |
|
|
| |
Beginning |
Ending |
| |
Balance |
Balance |
| Assets |
|
|
| Cash |
$50,000 |
$70,000 |
| Accounts receivable |
20,000 |
25,000 |
| Inventory |
30,000 |
35,000 |
| Plant and Equipment (net) |
120,000 |
110,000 |
| Investment in Cedar Company |
80,000 |
100,000 |
| Land (undeveloped) |
170,000 |
170,000 |
| Total Assets |
$470,000 |
510,000 |
| |
|
|
| Liabilities and Owners’ Equity |
|
|
| Accounts payable |
$70,000 |
$90,000 |
| Long-term debt |
250,000 |
250,000 |
| Owner’s equity |
150,000 |
170,000 |
| Total liabilities and owner’s equity |
$470,000 |
$510,000 |
| Beaker Company |
| 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 |
10,000 |
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?
|
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