tal assets abilities and Stockholders' Equity counts payable ng-term debt ockholders' equity $ 380,000 1,021,000 1,093,000 tal liabilities and stockholders' equity $ 2,494,000 Joel de Paris, Incorporated Income Statement les erating expenses t operating income terest and taxes: Interest expense Tax expense t income $ 2,494,000 $ 111,000 200,000 $5,208,000 4,322,640 885,360 311,000 $ 574,360 $ 2,570,000 $ 340,000 1,021,000 1,209,000 $ 2,570,000 company paid dividends of $458,360 last year. The "Investment in Buisson, S.A.," on the balance sheet represent e stock of another company. The company's minimum required rate of return 15%. uired: Compute the company's average operating assets for last year. Compute the company's margin, turnover, and return on investment (ROI) for last year.
tal assets abilities and Stockholders' Equity counts payable ng-term debt ockholders' equity $ 380,000 1,021,000 1,093,000 tal liabilities and stockholders' equity $ 2,494,000 Joel de Paris, Incorporated Income Statement les erating expenses t operating income terest and taxes: Interest expense Tax expense t income $ 2,494,000 $ 111,000 200,000 $5,208,000 4,322,640 885,360 311,000 $ 574,360 $ 2,570,000 $ 340,000 1,021,000 1,209,000 $ 2,570,000 company paid dividends of $458,360 last year. The "Investment in Buisson, S.A.," on the balance sheet represent e stock of another company. The company's minimum required rate of return 15%. uired: Compute the company's average operating assets for last year. Compute the company's margin, turnover, and return on investment (ROI) for last year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Financial data for Joel de Paris, Incorporated, for last year follow:
Joel de Paris, Incorporated
Balance Sheet
Assets
Cash
Accounts receivable
Inventory
Plant and equipment, net
Investment in Buisson, S.A.
Land (undeveloped)
Total assets
Liabilities and Stockholders' Equity
Accounts payable
Long-term debt
Stockholders' equity
Joel de Paris, Incorporated
Income Statement
Sales
Operating expenses
Net operating income
Interest and taxes:
Interest expense
Tax expense
Net income
$ 111,000
200,000
1. Average operating assets
2. Margin
2. Turnover
2. ROI
3. Residual income
$ 340,000
1,021,000
1,209,000
Total liabilities and stockholders' equity $ 2,494,000 $ 2,570,000
Beginning
Balance
$ 132,000
343,000
577,000
788,000
405,000
249,000
$ 2,494,000
$ 5,208,000
4,322,640
885,360
311,000
$ 574,360
%
%
$ 380,000
1,021,000
1,093,000
Ending
Balance
The company paid dividends of $458,360 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 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.
Note: Round "Margin", "Turnover" and "ROI" to 2 decimal places.
3. What was the company's residual income last year?
$ 127,000
481,000
479,000
793,000
435,000
255,000
$ 2,570,000
Expert Solution
Step 1: Formulae used
Average operating assets = (operating asssets at the beginning + operating assets at the end) / 2
margin = net operating income / sales * 100
Turnover = sales / average operating assets
ROI = Net operating income / average operating assets * 100
Residual Income = net operating income - average operating assets * minimum rate of return
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