Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 138,000 $ 134,000 Accounts receivable 342,000 483,000 Inventory 580,000 473,000 Plant and equipment, net 810,000 820,000 Investment in Buisson, S.A. 400,000 435,000 Land (undeveloped) 248,000 250,000 Total assets $ 2,518,000 $ 2,595,000 Liabilities and Stockholders' Equity Accounts payable $ 375,000 $ 340,000 Long-term debt 1,046,000 1,046,000 Stockholders' equity 1,097,000 1,209,000 Total liabilities and stockholders' equity $ 2,518,000 $ 2,595,000 Joel de Paris, Inc. Income Statement Sales $ 5,103,000 Operating expenses 4,235,490 Net operating income 867,510 Interest and taxes: Interest expense $ 114,000 Tax expense 204,000 318,000 Net income $ 549,510 The company paid dividends of $437,510 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. (Round "Margin", "Turnover" and "ROI" to 2 decimal places.) 3. What was the company’s residual income last year?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 11-17 (Algo) Return on Investment (ROI) and Residual Income [LO11-1, LO11-2]

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

Joel de Paris, Inc. Balance Sheet
	Beginning Balance		Ending Balance
Assets
Cash	$	138,000		$	134,000
Accounts receivable		342,000			483,000
Inventory		580,000			473,000
Plant and equipment, net		810,000			820,000
Investment in Buisson, S.A.		400,000			435,000
Land (undeveloped)		248,000			250,000
Total assets	$	2,518,000		$	2,595,000
Liabilities and Stockholders' Equity
Accounts payable	$	375,000		$	340,000
Long-term debt		1,046,000			1,046,000
Stockholders' equity		1,097,000			1,209,000
Total liabilities and stockholders' equity	$	2,518,000		$	2,595,000

Joel de Paris, Inc. Income Statement
Sales			$	5,103,000
Operating expenses				4,235,490
Net operating income				867,510
Interest and taxes:
Interest expense	$	114,000
Tax expense		204,000		318,000
Net income			$	549,510

The company paid dividends of $437,510 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. (Round "Margin", "Turnover" and "ROI" to 2 decimal places.)

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

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