Financial Data for Bingham Company for Last Year Appear Below

question 40

Essay

Financial data for Bingham Company for last year appear below:

Bingham Company
Statements of Financial Position
$\begin{array} { l r r } & \begin{array} { r } \text { Beginning } \\ \text { Balance } \end{array} & \begin{array} { r } \text { Ending } \\ \text { Balance } \end{array} \\ \text { Assets: } & \underline { } & \\ \text { Cash } & \$ 135,000 & \$ 266,000 \\ \text { Accounts receivable } & 225,000 & 475,000 \\ \text { Inventory } & 314,000 & 394,000 \\ \text { Plant and equipment (net) } & 940,000 & 860,000 \\ \text { Investment in Carr Company } & 104,000 & 101,000 \\ \text { Land (undeveloped) } & \underline { 198,000 } & \underline { 65,000 } \\ \text { Total assets } & \$ 1,916,000 & \$ 2,161,000 \\ & & \end{array}$
$\begin{array} { l r r } \text { Liabilities and owners' equity:}\\\text { Accounts payable } & \$ 88,000 & \$ 119,000 \\ \text { Long-term debt } & 585,000 & 665,000 \\ \text { Owners' equity } & 1,243,000 & 1,377,000 \\ \text { Total liabilities } & & \\ \text { and owners' equity } & \$ 1,916,000 & \$ 2,161,000 \\ & & \end{array}$
Bingham Company
Income Statement $\begin{array}{l}\begin{array}{lll}\text { Sales}\\\text { Less operating expenses}\\\text { Net operating income}\\\text { Less interest and taxes:}\\\text { Interest expense}\\\text { Tax expense}\\\text { Operating Income}\\\end{array}\begin{array}{lll}\\ \\\ \$ 90,000 \\129,000\end{array}\begin{array}{lll}\$ 4,644,000 \\4, 291,000 \\353,000 \\\\\\219,000 \\\$ 134,000\end{array}\end{array}$

The "Investment in Carr Company" on the statement of financial position represents an investment in the stock of another company.

Required:

a) Compute the company's margin, turnover, and return on investment for last year.
b) The Board of Directors of Beaker Company have set a minimum required return of 15%. What was the company's residual income last year?

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Definitions:

Common Law

A collection of legal principles established by judicial decisions, instead of being formulated through legislative processes or documented in formal statutes.

Statutory Law

Laws enacted by a legislative body, such as Congress or a state legislature, that governs society and is codified in statutes.

Predominant Purpose Test

A legal test used to determine whether a contract is primarily for the sale of goods or the provision of services under the Uniform Commercial Code.

Unconscionable

In contract law, a contract that is grossly unfair or one-sided; one that “shocks the conscience of the court.”