Financial Data for Beaker Company for Last Year Appear Below

question 162

Essay

Financial data for Beaker Company for last year appear below:
Beaker Company
Statements of Financial Position

$\begin{array}{|l|r|r|}\hline & \text { Beginning Balance } & \text { Ending Balance } \\\hline \text { Assets: } & & \\\hline \text { Cash } & \$ 50,000 & \$ 70,000 \\\hline \text { Accounts receivable } & 20,000 & 25,000 \\\hline \text { Inventory } & 30,000 & 35,000 \\\hline \text { Plant and equipment (net) } & 120,000 & 110,000 \\\hline \text { Investment in Cedar Company } & 80,000 & 100,000 \\\hline \text { Land (underdeveloped) } & \underline{170,000} & \underline{170,000} \\\hline \text { Total assets } & \$ 470,000 & \$ 510,000 \\\hline & & \\\hline \text { Liabilities and owners' equity: } & & \\\hline \text { Accounts payable } & \$ 70,000 & \$ 90,000 \\\hline \text { Long-term deby } & 250,000 & 250,000 \\\hline \text { Owner's' equity } & \underline{150,000} & \underline{170,000} \\\hline \text { Total liabilities and owners' equity } & \$ 470,000 & \$ 510,000 \\\hline\end{array}$
Beaker Company
Income Statement

$\begin{array}{|l|r|r|}\hline \text { Sa;es } & & \$ 414,000 \\\hline \text { Less operating expenses } & & \underline{351,900} \\\hline \text { Net operating income } & & 62,100 \\\hline \text { Less interest and taxes: } & & \\\hline \text { Interest expense } & \$ 30,000 & \\\hline \text { Tax expense } & \underline{10,000} & \underline{40,000} \\\hline \text { Operating Income } & & \underline{\$ 22,100} \\\hline\end{array}$

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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Definitions:

Long-term Performance

An evaluation of an entity's performance, such as a business or investment, over an extended period of time to assess stability and growth.

Critical Incident Method

A job analysis method by which important job tasks are identified for job success

Recency Error

A bias in performance evaluations where more weight is given to recent events or achievements, overlooking the employee's overall performance period.

Motivation

The driving force behind individuals' actions, desires, and needs, influencing their behavior towards achieving certain goals.