Question

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 $ 126,000 Accounts receivable 347,000 474,000 Inventory 580,000 489,000 Plant and equipment, net 803,000 811,000 Investment in Buisson, S.A. 401,000 431,000 Land (undeveloped) 250,000 254,000 Total assets $ 2,511,000 $ 2,585,000 Liabilities and Stockholders' Equity Accounts payable $ 384,000 $ 346,000 Long-term debt 1,014,000 1,014,000 Stockholders' equity 1,113,000 1,225,000 Total liabilities and stockholders' equity $ 2,511,000 $ 2,585,000 Joel de Paris, Inc. Income Statement Sales $ 4,512,000 Operating expenses 3,880,320 Net operating income 631,680 Interest and taxes: Interest expense $ 122,000 Tax expense 207,000 329,000 Net income $ 302,680 The company paid dividends of $190,680 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?

Answer 1

1. Compute the company's average operating assets for last year
Particulars	Assets	Average( last+Current/2
Last Year	Current Year
Cash	130000	126000	128000
Account Receivables	347000	474000	410500
Inventory	570000	489000	529500
Total	1068000

2.Compute the company’s margin, turnover, and return on investment (ROI) for last year
Particulars	Amount(in $)	Amount(in $)
Sales		4512000
Operating income		631680
Total Revenue		5143680
Less: Operation exp		3880320
Less:Interest Exp		122000
Less: Tax Exp		207000
Profit after tax		934360
Investment(Ending)
Equity Shareholder's fund	1225000
Long Term Debt	1014000	2239000
ROI ( Profit/Investment)		41.73%

3.Compute the company’s Residual income last year
Particulars	Amount(in $)
Sales	4512000
Operating income	631680
Total Revenue	5143680
Less: Operation exp	3880320
Less:Interest Exp	122000
Less: Tax Exp	207000
Profit after tax	934360
Less: Dividend	190680
Residual Income	743680