Question

Financial data for Beaker Company for last year appear below:

Beaker Company
Statements of Financial Position
	Beginning Balance			Ending Balance
Assets:
Cash	$	346,000		$	324,792
Accounts receivable		202,000			159,000
Inventory		298,000			299,000
Plant and equipment (net)		463,000			455,000
Investment in Cedar Company		318,000			293,000
Land (undeveloped)		237,000			237,000
Total assets	$	1,864,000		$	1,767,792
Liabilities and owners' equity:
Accounts payable	$	249,000		$	228,000
Long-term debt		855,000			855,000
Owners' equity		760,000			684,792
Total liabilities and owners' equity	$	1,864,000		$	1,767,792

Beaker Company
Income Statement
Sales				$	1,790,000
Less operating expenses					1,440,950
Net operating income					349,050
Less interest and taxes:
Interest expense	$	98,600
Tax expense		125,658			224,258
Net income				$	124,792

The company paid dividends of $200,000 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 25%.

Required:

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)	$

Answer 1

Ans.	Assets	Beginning balance	Ending balance
	Cash	$346,000	$324,792
	Accounts receivables	$202,000	$159,000
	Inventory	$298,000	$299,000
	Plant and equipment	$463,000	$455,000
	Total operating assets	$1,309,000	$1,237,792
	*Undeveloped land and investment in other company are not included in operating assets.
Ans.	Average operating assets = (Beginning operating assets + Ending operating assets) / 2
		($1,309,000 + $1,237,792) / 2
		$2,546,792 / 2
		$1,273,396
Ans.	Operating income and sales values are already given.
Ans.	Margin =   Net operating income / Sales * 100
	$349,050 / $1,790,000 * 100
	19.50%
Ans.	Turnover = Sales / Average operating assets
	$1,790,000 / $1,273,396
	1.41	times
Ans.	Return on investment (ROI) = Net operating income / Average operating assets * 100
	$349,050 / $1,273,396 * 100
	27.41%
Ans.	Residual income =   Operating income - Minimum required income
	$349,050 - $318,349
	$30,701
	*Minimum required income   =   Average operating assets * Desired rate of return
	$1,273,396 * 25%
	$318,349.00
	*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.