Financial data for beaker company

Financial data for Beaker Company for last year appear below.

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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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