Financial Data for Beaker Company for Last Year Appear Below $\quad$

question 166

Essay

Financial data for Beaker Company for last year appear below:

$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Beaker Company
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Statements of Financial Position
$\begin{array}{lrr}&\text { Beginning }&\text { Ending }\\&\text { Balance }&\text { Balance }\\\text { Assets: }\\\text { Cash } & \$ 50,000 & \$ 70,000 \\\text { Accounts receivable } & 20,000 & 25,000 \\\text { Inventory } & 30,000 & 35,000 \\\text { Plant and equipment (net) } & 120,000 & 110,000 \\\text { Investment in Cedar Company } & 80,000 & 100,000 \\\text { Land (undeveloped) } & \underline{170,000} & \underline{170,000} \\\text { Total assets } & \$ 470,000 & \$ 510,000\\\\\text { Liabilities and owners' equity: }\\\text { Accounts payable } & \$ 70,000 & \$ 90,000 \\\text { Long-term debt } & 250,000 & 250,000 \\\text { Owners' equity } & \underline{150,000} & \underline{170,000} \\ \text { Total liabilities } & &\\\text { and owners' equity }& \$ 470,000 & \$ 510,000 \end{array}$

$\begin{array}{lrr}\end{array}$ Beaker Company
Income Statement
$\begin{array}{lccc}\text { Sales } &&\$ 414,000\\\text { Less operating expenses }&&351,900\\\text { Net operating income }&&62,100\\\text { Less interest and taxes: }\\\text {Interest expense }&\$ 30.000\\\text {Tax expense}&10.000 &40,000\\\text { Operating Income }&&\$ 22,100\\\end{array}$

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:

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 20%. What was the company's residual income last year?

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