Question

Clear Open (216) Youtu. VLOG:SI... Homepage... outfi ASOSIOL.. Search Text apter 10 graded one-timer HW Saved Help S. Problem 10-15 Return on Investment (ROI) and Residual Income (LO10-1, LO10-2) Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Ending Balance 3 00:57:46 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 Total liabilities and stockholders' equity 126.000 346,000 576,000 882,000 391,000 249,000 $ 2,570,000 137,000 489.000 487,000 857,000 427,000 250.000 $2,647,000 371,000 1,021,000 1,178,000 $ 2,570,000 $ 340,000 1,021.000 1,286,000 $2,647,000 Joel de Paris, Inc. Income Statement Sales Operating expenses Net operating income Interest and taxes: Interest expense $ 112,000 Tax expense 205,000 Net income $ 4,680.000 4.071.600 608,400 317,000 291,400 The compony paid dividends of $183,400 last year. The "Investment in Busso, SAT on the balance sheet represents an investment in the stock of another company. The company's minimum required rate or retom of 15% Required:

Answer 1

Joel De Paris, Inc. - Part 1 Return on asset is given ny net income divided by Average total assets or Profit Margin Asset Turnover where Profit Margin Net income/sales and Asset turnover= Sales/Average total assets Profit margin 13.00% NO/ 608400 Sales 4680000 Investment turnover 2.4 Sales 4680000 Avg. operating Assets ROI PM IT 1950000 (See WN) 31.20 % WN-Calculation of Average operating assets Beg. Balance Ending Bal. Cash 126000 137000 A/R 346000 489000 487000 Inventory Plant and Equipment 576000 882000 857000 Total 1930000 1970000 Now, average operating assets (1930000+ 1970000) 2 $1950,000 Note: Investment in Buisson and Undeveloped land is not an operating asset Part 2 Avg. operating Assets required rate of return 1950000 15% 292500 Required operating income Actual Operating Income Less: Required Ol (above) Residual Income 608400 292500 315900