Financial data for Beaker Company for last year appear below:
Beaker Company
Statements of Financial Position
|
Assets |
||
|
Beginning Balance |
Ending Balance |
|
|
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 |
|
Owners’ equity |
150,000 |
170,000 |
|
Total liabilities and owners equity |
470,000 |
510,000 |
|
Beaker Company |
||
|
Income Statement |
||
|
Sales |
414,000 |
|
|
Less Operating expenses |
351,900 |
|
|
New Operating Income |
62,100 |
|
|
Less Interest and taxes: |
||
|
Interest expense |
30,000 |
|
|
Tax Expense |
10,000 |
40,000 |
|
Net Income |
$22,100 |
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?