Financial data for Hunger Games Company for last year appear below: Hunger Games Company Statements of Financial Position Beginning Balance Ending Balance Assets: Cash $120,700 $220,000 Accounts receivable 225,000 475,000 Inventory 317,000 390,000 Plant and equipment (net) 940,000 860,000 Investment in Katniss Company 100,000 98,000 Land (undeveloped) 198,000 65,000 Total assets $1,900,700 $2,108,000 Liabilities and owners' equity: Accounts payable $178,700 $8,000 Long-term debt 512,000 600,000 Owners' equity 1,210,000 1,500,000 Total liabilities and owners' equity $1,900,700 $2,108,000 Hunger Games Company Income Statement Sales $4,500,000 Less operating expenses 4,000,000 Net operating income 500,000 Less interest and taxes: Interest expense $97,000 Tax expense 127,000 224,000 Operating Income $276,000 The "Investment in Katniss Company" on the statement of financial position represents an investment in the stock of another company. Required: 1. Compute the company's margin, turnover, and return on investment for last year. 2. The Board of Directors of Hunger Games Company have set a minimum required return of 15%. What was the company's residual income last year?
Financial data for Hunger Games Company for last year appear below:
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Hunger Games Company |
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Statements of Financial Position |
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Beginning Balance |
Ending Balance |
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Assets: |
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Cash |
$120,700 |
$220,000 |
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|
225,000 |
475,000 |
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Inventory |
317,000 |
390,000 |
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Plant and equipment (net) |
940,000 |
860,000 |
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Investment in Katniss Company |
100,000 |
98,000 |
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Land (undeveloped) |
198,000 |
65,000 |
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Total assets |
$1,900,700 |
$2,108,000 |
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Liabilities and owners' equity: |
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|
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Accounts payable |
$178,700 |
$8,000 |
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Long-term debt |
512,000 |
600,000 |
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Owners' equity |
1,210,000 |
1,500,000 |
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Total liabilities and owners' equity |
$1,900,700 |
$2,108,000 |
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Hunger Games Company |
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Income Statement |
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Sales |
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$4,500,000 |
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Less operating expenses |
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4,000,000 |
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Net operating income |
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500,000 |
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Less interest and taxes: |
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|
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Interest expense |
$97,000 |
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Tax expense |
127,000 |
224,000 |
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Operating Income |
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$276,000 |
The "Investment in Katniss Company" on the
Required:
1. Compute the company's margin, turnover, and
2. The Board of Directors of Hunger Games Company have set a minimum required return of 15%. What was the company's residual income last year?
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