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Question 1 Beaker Company Statements of Financial Position Beginning Balance Ending Balance Assets: Cash $ 256,000...

Question 1

Beaker Company

Statements of Financial Position

Beginning Balance

Ending Balance

Assets:

Cash

$

256,000

$

231,240

Accounts receivable

144,000

192,000

Inventory

310,000

240,000

Plant and equipment (net)

492,000

445,000

Investment in Cedar Company

301,000

286,000

Land (undeveloped)

280,000

280,000

Total assets

$

1,783,000

$

1,674,240

Liabilities and owners' equity:

Accounts payable

$

214,000

$

238,000

Long-term debt

810,000

810,000

Owners' equity

759,000

626,240

Total liabilities and owners' equity

$

1,783,000

$

1,674,240

Beaker Company

Income Statement

Sales

$

2,060,000

Less operating expenses

1,854,000

Net operating income

206,000

Less interest and taxes:

Interest expense

$

96,900

Tax expense

63,860

160,760

Net income

$

45,240

The company paid dividends of  $178,000 last year. The "Investment in Cedar Company" on the statement of financial position represents an investment in the stock of another company.

Additionally; The Board of Directors of Beaker Company has set a minimum required return of 15%.

Please calculate the following:

Average Operating Assets (rounded to the nearest whole dollar, with commas)

$

Operating Income (rounded to the nearest whole dollar, with commas)

$

Sales (rounded to the nearest whole dollar with commas)

$

Margin (rounded to the 2 decimal places)

%

Turnover (rounded to 2 decimal places)

Return On Investment (rounded to 2 decimal places)

%

Residual Income (rounded to the nearest whole dollar, with commas)

$

Solutions

Expert Solution

Average operating assets = (beginning operating assets + ending operating assets)/2

Beginning operating assets

Cash

256,000

Accounts receivable

144,000

Inventory

310,000

Plant and equipment (net)

492,000

Total beginning operating assets

1202000

Ending operating assets

Cash

231,240

Accounts receivable

192,000

Inventory

240,000

Plant and equipment (net)

445,000

Total beginning operating assets

1108240

Average operating assets = (1202000+1108240)/2 = 1155120

Margin = net operating income / sales = 206000/2060000 = 10%

Turnover = sales/ average operating assets = 2060000/1155120 = 1.78

ROI = margin * turnover = 10%*1.78 = 17.8%

Residual income = net operating income – return on average operating assets = 206000-(1155120*15%) = $32732

Average Operating Assets (rounded to the nearest whole dollar, with commas)

$1,155,120

Operating Income (rounded to the nearest whole dollar, with commas)

$206,000

Sales (rounded to the nearest whole dollar with commas)

$2,060,000

Margin (rounded to the 2 decimal places)

10.00%

Turnover (rounded to 2 decimal places)

1.78

Return On Investment (rounded to 2 decimal places)

17.80%

Residual Income (rounded to the nearest whole dollar, with commas)

$32,732

ekkarill92 answered 1 year ago
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