Question

Financial data for Beaker Company for last year appear below:

Beaker Company
Statements of Financial Position
	Beginning Balance			Ending Balance
Assets:
Cash	$	263,000		$	31,164
Accounts receivable		126,000			215,000
Inventory		255,000			266,000
Plant and equipment (net)		466,000			473,000
Investment in Cedar Company		221,000			293,000
Land (undeveloped)		497,000			497,000
Total assets	$	1,828,000		$	1,775,164
Liabilities and owners' equity:
Accounts payable	$	164,000		$	228,000
Long-term debt		884,000			884,000
Owners' equity		780,000			663,164
Total liabilities and owners' equity	$	1,828,000		$	1,775,164

Beaker Company
Income Statement
Sales				$	2,040,000
Less operating expenses					1,795,200
Net operating income					244,800
Less interest and taxes:
Interest expense	$	100,300
Tax expense		78,336			178,636
Net income				$	66,164

The company paid dividends of $183,000 last year. The "Investment in Cedar Company" on the statement of financial position represents an investment in the stock of another company.

Additionally; The Board of Directors of Beaker Company has set a minimum required return of 20%.

Required:

Please calculate the following:

Average Operating Assets (rounded to the nearest whole dollar, with commas)	$
Operating Income (rounded to the nearest whole dollar, with commas)	$
Sales (rounded to the nearest whole dollar with commas)	$
Margin (rounded to the 2 decimal places)	%
Turnover (rounded to 2 decimal places)
Return On Investment (rounded to 2 decimal places)	%
Residual Income (rounded to the nearest whole dollar, with commas)	$

Answer 1

Answer- The company average operating assets for last year was =$1047582.

Explanation- Calculation of average operating assets = (Opening operating assets+ Closing operating assets)/2

=($263000+$126000+$255000+$466000)+($31164+$215000+$266000+$47300)/2

= ($1110000+$985164)/2

= $1047582

Operating assets = Cash+ Accounts receivable+ Inventory+ Plant & equipment, net

Operating income =$244800

Sales = $2040000

Margin – (Net operating income /Sales)*100

= ($244800/$2040000)*100

= 12%

Turnover = Sales/ Average operating assets

= $2040000/$1047582

=1.95

Return on investment = Margin*Turnover

= 12%*1.95

= 23.4%

3)- Residual income for the last year = $360484.

Explanation-

Residual income =Operating income –(Average operating assets*Required rate of return)

= $244800-($1047582*20%)

= $570000-$209516

= $360484