Question

In: Accounting

Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...

Financial data for Joel de Paris, Inc., for last year follow:

Joel de Paris, Inc.
Balance Sheet
Beginning
Balance
Ending
Balance
Assets
Cash $ 130,000 $ 138,000
Accounts receivable 334,000 479,000
Inventory 564,000 482,000
Plant and equipment, net 862,000 831,000
Investment in Buisson, S.A. 392,000 425,000
Land (undeveloped) 252,000 249,000
Total assets $ 2,534,000 $ 2,604,000
Liabilities and Stockholders' Equity
Accounts payable $ 371,000 $ 340,000
Long-term debt 985,000 985,000
Stockholders' equity 1,178,000 1,279,000
Total liabilities and stockholders' equity $ 2,534,000 $ 2,604,000


Joel de Paris, Inc.
Income Statement
Sales $ 4,202,000
Operating expenses 3,613,720
Net operating income 588,280
Interest and taxes:
Interest expense $ 124,000
Tax expense 192,000 316,000
Net income $ 272,280


The company paid dividends of $171,280 last year. The “Investment in Buisson, S.A.,” on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%.

Required:

1. Compute the company's average operating assets for last year.

2. Compute the company’s margin, turnover, and return on investment (ROI) for last year. (Do not round intermediate calculations and round your final answers to 2 decimal places.)

3. What was the company’s residual income last year?

Solutions

Expert Solution

Ans. Assets Beginning balance Ending balance
Cash $130,000 $138,000
Accounts receivables $334,000 $479,000
Inventory $564,000 $482,000
Plant and equipment $862,000 $831,000
Total operating assets $1,890,000 $1,930,000
*Undeveloped land and investment in other company are not included in operating assets.
Ans.1 Average operating assets = (Beginning operating assets + Ending operating assets) / 2
($1,890,000 + $1,930,000) / 2
$3,820,000 / 2
$1,910,000
Ans.2 a Margin =   Net operating income / Sales * 100
$588,280 / $4,202,000 * 100
14.00%
Ans.2 b Turnover = Sales / Average operating assets
$4,202,000 / $1,910,000
2.20 times
Ans. 2 c Return on investment (ROI) =   Turnover * Margin
2.20 * 14%
30.80%
Ans. 3 Residual income =   Operating income - Minimum required income
$588,280 - $286,500
$301,780
*Minimum required income   =   Average operating assets * Desired rate of return
$1,910,000 * 15%
$286,500
*Residual income is the difference between Net operating income and minimum required income, and the
minimum required income is the product of average operating assets and desired rate of return.

Related Solutions

Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 127,000 $ 126,000 Accounts receivable 349,000 477,000 Inventory 570,000 473,000 Plant and equipment, net 864,000 874,000 Investment in Buisson, S.A. 408,000 429,000 Land (undeveloped) 253,000 254,000 Total assets $ 2,571,000 $ 2,633,000 Liabilities and Stockholders' Equity Accounts payable $ 376,000 $ 340,000 Long-term debt 1,035,000 1,035,000 Stockholders' equity 1,160,000 1,258,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 136,000 $ 134,000 Accounts receivable 336,000 471,000 Inventory 573,000 484,000 Plant and equipment, net 785,000 781,000 Investment in Buisson, S.A. 392,000 431,000 Land (undeveloped) 254,000 252,000 Total assets $ 2,476,000 $ 2,553,000 Liabilities and Stockholders' Equity Accounts payable $ 382,000 $ 349,000 Long-term debt 1,016,000 1,016,000 Stockholders' equity 1,078,000 1,188,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 126,000 $ 127,000 Accounts receivable 349,000 490,000 Inventory 567,000 478,000 Plant and equipment, net 848,000 835,000 Investment in Buisson, S.A. 404,000 432,000 Land (undeveloped) 252,000 251,000 Total assets $ 2,546,000 $ 2,613,000 Liabilities and Stockholders' Equity Accounts payable $ 378,000 $ 338,000 Long-term debt 978,000 978,000 Stockholders' equity 1,190,000 1,297,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 136,000 $ 132,000 Accounts receivable 342,000 487,000 Inventory 561,000 489,000 Plant and equipment, net 831,000 802,000 Investment in Buisson, S.A. 402,000 432,000 Land (undeveloped) 254,000 246,000 Total assets $ 2,526,000 $ 2,588,000 Liabilities and Stockholders' Equity Accounts payable $ 376,000 $ 349,000 Long-term debt 1,002,000 1,002,000 Stockholders' equity 1,148,000 1,237,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 133,000 $ 133,000 Accounts receivable 338,000 475,000 Inventory 568,000 490,000 Plant and equipment, net 811,000 792,000 Investment in Buisson, S.A. 405,000 432,000 Land (undeveloped) 245,000 254,000 Total assets $ 2,500,000 $ 2,576,000 Liabilities and Stockholders' Equity Accounts payable $ 387,000 $ 335,000 Long-term debt 1,003,000 1,003,000 Stockholders' equity 1,110,000 1,238,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 131,000 $ 126,000 Accounts receivable 331,000 485,000 Inventory 574,000 489,000 Plant and equipment, net 894,000 870,000 Investment in Buisson, S.A. 405,000 432,000 Land (undeveloped) 248,000 248,000 Total assets $ 2,583,000 $ 2,650,000 Liabilities and Stockholders' Equity Accounts payable $ 377,000 $ 337,000 Long-term debt 1,044,000 1,044,000 Stockholders' equity 1,162,000 1,269,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 133,000 $ 135,000 Accounts receivable 343,000 473,000 Inventory 570,000 483,000 Plant and equipment, net 874,000 869,000 Investment in Buisson, S.A. 393,000 432,000 Land (undeveloped) 247,000 246,000 Total assets $ 2,560,000 $ 2,638,000 Liabilities and Stockholders' Equity Accounts payable $ 388,000 $ 330,000 Long-term debt 999,000 999,000 Stockholders' equity 1,173,000 1,309,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 139,000 $ 136,000 Accounts receivable 348,000 477,000 Inventory 560,000 489,000 Plant and equipment, net 793,000 778,000 Investment in Buisson, S.A. 406,000 435,000 Land (undeveloped) 252,000 250,000 Total assets $ 2,498,000 $ 2,565,000 Liabilities and Stockholders' Equity Accounts payable $ 386,000 $ 346,000 Long-term debt 956,000 956,000 Stockholders' equity 1,156,000 1,263,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 132,000 $ 138,000 Accounts receivable 341,000 484,000 Inventory 566,000 478,000 Plant and equipment, net 891,000 870,000 Investment in Buisson, S.A. 404,000 430,000 Land (undeveloped) 251,000 253,000 Total assets $ 2,585,000 $ 2,653,000 Liabilities and Stockholders' Equity Accounts payable $ 385,000 $ 349,000 Long-term debt 1,004,000 1,004,000 Stockholders' equity 1,196,000 1,300,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 135,000 $ 126,000 Accounts receivable 330,000 488,000 Inventory 562,000 485,000 Plant and equipment, net 843,000 811,000 Investment in Buisson, S.A. 396,000 428,000 Land (undeveloped) 247,000 247,000 Total assets $ 2,513,000 $ 2,585,000 Liabilities and Stockholders' Equity Accounts payable $ 374,000 $ 346,000 Long-term debt 995,000 995,000 Stockholders' equity 1,144,000 1,244,000 Total liabilities and stockholders' equity $...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT