Problem 12-15 Return on Investment (ROI) and Residual Income [LO12-1, LO12-2]   Financial data for Joel de Paris, Inc., for last year follow:   Joel de Paris, Inc. Balance Sheet   Beginning Balance Ending Balance Assets Cash $ 129,000 $ 140,000 Accounts receivable   336,000   473,000 Inventory   561,000   477,000 Plant and equipment, net   834,000   810,000 Investment in Buisson, S.A.   400,000   432,000 Land (undeveloped)   254,000   247,000 Total assets $ 2,514,000 $ 2,579,000 Liabilities and Stockholders' Equity Accounts payable $ 384,000 $ 346,000 Long-term debt   967,000   967,000 Stockholders' equity   1,163,000   1,266,000 Total liabilities and stockholders' equity $ 2,514,000 $ 2,579,000       Joel de Paris, Inc. Income Statement Sales   $ 4,324,000 Operating expenses     3,805,120 Net operating income     518,880 Interest and taxes:       Interest expense 124,000     Tax expense 193,000   317,000 Net income   $ 201,880     The company paid dividends of $98,880 last year. The “Investment in Buisson, S.A.,” on the balance sheet represents an investment in the stock of another company.   Required: 1. Compute the company’s margin, turnover, and return on investment (ROI) for last year. (Round your answers to 1 decimal place.)      2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 22%. What was the company’s residual income last year?

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Problem 12-15 Return on Investment (ROI) and Residual Income [LO12-1, LO12-2]

 

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


 

Joel de Paris, Inc.
Balance Sheet
  Beginning
Balance
Ending
Balance
Assets
Cash $ 129,000 $ 140,000
Accounts receivable   336,000   473,000
Inventory   561,000   477,000
Plant and equipment, net   834,000   810,000
Investment in Buisson, S.A.   400,000   432,000
Land (undeveloped)   254,000   247,000
Total assets $ 2,514,000 $ 2,579,000
Liabilities and Stockholders' Equity
Accounts payable $ 384,000 $ 346,000
Long-term debt   967,000   967,000
Stockholders' equity   1,163,000   1,266,000
Total liabilities and stockholders' equity $ 2,514,000 $ 2,579,000

 

   

Joel de Paris, Inc.
Income Statement
Sales   $ 4,324,000
Operating expenses     3,805,120
Net operating income     518,880
Interest and taxes:      
Interest expense 124,000    
Tax expense 193,000   317,000
Net income   $ 201,880

 


 

The company paid dividends of $98,880 last year. The “Investment in Buisson, S.A.,” on the balance sheet represents an investment in the stock of another company.


 

Required:

1. Compute the company’s margin, turnover, and return on investment (ROI) for last year. (Round your answers to 1 decimal place.) 

 


 

2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 22%. What was the company’s residual income last year?

 

 

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