Financial data for beaker company for last year appear below.

Financial data for Beaker Company for last year appear below.

 

Beaker Company
Statement of Financial Position

Beginning Balance      Ending  Balance

Assets

Cash                                                    $50,000                                   $70,000

Accounts receivable                            20,000                         25,000

Inventory                                             30,000                         35,000

Plant and Equipment (net)                   120,000                                   110,000

Investment in Cedar Company                        80,000                         100,000

Land (undeveloped)                            170,000                                   170,000

Total Assets                                         $470,000                     510,000

Liabilities and Owners’ Equity

Accounts payable                                $70,000                                   $90,000

Long-term debt                                                250,000                                   250,000

Owner’s equity                                     150,000                                   170,000

Total liabilities and owner’s equity       $470,000                     $510,000

 

Beaker Company

Income Statement

Sales                                                                                        $414,000

Less Operating Expenses                                                         351,900

Net Operating Income                                                              62,100

Less Interest and Taxes

Interest Expense                                  $30,000          

Tax Expense                                        10,000                         40,000

Net Income                                                                              $22,000

 

The company paid dividends of $2,100 last year. The Investment in Cedar Company on the statement of financial position represents an investment in the stock of another company.

Required:
i. Compute the company’s margin, turnover, and return on investment for last year.
ii. The board of directors of Beaker Company has set a minimum required return of 20%. What was the company’s residual income last year? (Points : 15)

 

 

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