Financial data for Beaker Company for last year appear below:
| Beaker Company | ||
| Assets: | ||
| Cash | $ 292,000 | $ 381,892 |
|---|---|---|
| Accounts receivable | 196,000 | 182,000 |
| Inventory | 257,000 | 279,000 |
| Plant and equipment (net) | 487,000 | 433,000 |
| Investment in Cedar Company | 302,000 | 333,000 |
| Land (undeveloped) | 278,000 | 278,000 |
| Total assets | $ 1,812,000 | $ 1,886,892 |
| Liabilities and owners’ equity: | ||
| Accounts payable | $ 191,000 | $ 140,000 |
| Long-term debt | 895,000 | 895,000 |
| Owners’ equity | 726,000 | 851,892 |
| Total liabilities and owners’ equity | $ 1,812,000 | $ 1,886,892 |
| Beaker Company | ||
| Income Statement | ||
| Sales | $ 2,730,000 | |
|---|---|---|
| Less operating expenses | 2,088,450 | |
| Net operating income | 641,550 | |
| Less interest and taxes: | ||
| Interest expense | $ 98,700 | |
| Tax expense | 230,958 | 329,658 |
| Net income | $ 311,892 | |
The company paid dividends of $186,000 last year. The “Investment in Cedar Company” on the statement of financial position represents an investment in the stock of another company.
REQUIRED:
- Compute the company’s margin, turnover, and return on investment for last year.
- The Board of Directors of Beaker Company has set a minimum required return of 46%. What was the company’s residual income last year?
