Financial data for Joel de Paris, Inc., for last year follow:
| Joel de Paris, Inc. Balance Sheet |
||||||
| Beginning Balance |
Ending Balance |
|||||
| Assets | ||||||
| Cash | $ | 126,000 | $ | 126,000 | ||
| Accounts receivable | 331,000 | 473,000 | ||||
| Inventory | 568,000 | 482,000 | ||||
| Plant and equipment, net | 875,000 | 859,000 | ||||
| Investment in Buisson, S.A. | 396,000 | 427,000 | ||||
| Land (undeveloped) | 247,000 | 245,000 | ||||
| Total assets | $ | 2,543,000 | $ | 2,612,000 | ||
| Liabilities and Stockholders' Equity | ||||||
| Accounts payable | $ | 388,000 | $ | 348,000 | ||
| Long-term debt | 1,002,000 | 1,002,000 | ||||
| Stockholders' equity | 1,153,000 | 1,262,000 | ||||
| Total liabilities and stockholders' equity | $ | 2,543,000 | $ | 2,612,000 | ||
| Joel de Paris, Inc. Income Statement |
|||||||||
| Sales | $ | 4,032,000 | |||||||
| Operating expenses | 3,548,160 | ||||||||
| Net operating income | 483,840 | ||||||||
| Interest and taxes: | |||||||||
| Interest expense | $ | 118,000 | |||||||
| Tax expense | 194,000 | 312,000 | |||||||
| Net income | $ | 171,840 | |||||||
The company paid dividends of $62,840 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 of 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. (Round "Margin", "Turnover" and "ROI" to 2 decimal places.)
3. What was the company’s residual income last year?
Comparative data on three companies in the same service industry are given below.
Required:
2. Fill in the missing information. (Round the "Turnover" and "ROI" answers to 2 decimal places.)
Homework Answers
Answer to Question 1:
Requirement 1:
Beginning Operating Assets = Cash + Accounts Receivable +
Inventory + Plant and Equipment, net
Beginning Operating Assets = $126,000 + $331,000 + $568,000 +
$875,000
Beginning Operating Assets = $1,900,000
Ending Operating Assets = Cash + Accounts Receivable + Inventory
+ Plant and Equipment, net
Ending Operating Assets = $126,000 + $473,000 + $482,000 +
$859,000
Ending Operating Assets = $1,940,000
Average Operating Assets = (Beginning Operating Assets + Ending
Operating Assets) / 2
Average Operating Assets = ($1,900,000 + $1,940,000) / 2
Average Operating Assets = $1,920,000
Requirement 2:
Margin = Net Operating Income / Sales
Margin = $483,840 / $4,032,000
Margin = 12%
Turnover = Sales / Average Operating Assets
Turnover = $4,032,000 / $1,920,000
Turnover = 2.10
Return on Investment = Margin * Turnover
Return on Investment = 12.00% * 2.10
Return on Investment = 25.20%
Requirement 3:
Residual Income = Net Operating Income - Minimum Required Return
* Average Operating Assets
Residual Income = $483,840 - 0.15 * $1,920,000
Residual Income = $195,840
Answer to Question 2:
Company A:
Margin = Net Operating Income / Sales
Margin = $553,860 / $3,077,000
Margin = 18.00%
Turnover = Sales / Average Operating Assets
Turnover = $3,077,000 / $1,810,000
Turnover = 1.70
Return on Investment = Margin * Turnover
Return on Investment = 18.00% * 1.70
Return on Investment = 30.60%
Company B:
Margin = Net Operating Income / Sales
Margin = $362,520 / $1,908,000
Margin = 19.00%
Return on Investment = Margin * Turnover
0.1140 = 0.1900 * Turnover
Turnover = 0.60
Turnover = Sales / Average Operating Assets
0.60 = $1,908,000 / Average Operating Assets
Average Operating Assets = $3,180,000
Company C:
Return on Investment = Margin * Turnover
Return on Investment = 4.00% * 2.50
Return on Investment = 10.00%
Turnover = Sales / Average Operating Assets
2.50 = Sales / $3,460,000
Sales = $8,650,000
Margin = Net Operating Income / Sales
0.04 = Net Operating Income / $8,650,000
Net Operating Income = $346,000
Add Answer to:
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 128,000 $ 135,000 Accounts receivable 341,000 470,000 Inventory 571,000 486,000 Plant and equipment, net 850,000 839,000 Investment in Buisson, S.A. 399,000 430,000 Land (undeveloped) 250,000 252,000 Total assets $ 2,539,000 $ 2,612,000 Liabilities and Stockholders' Equity Accounts payable $ 389,000 $ 350,000 Long-term debt 1,041,000 1,041,000 Stockholders' equity 1,109,000 1,221,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance 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 Total liabilities and stockholders' equity 126,000 333,000 573,000 808,000 398,000 249,000 2,487,000 130,000 481,000 479,000 790,000 425,000 249,000 2,554,000 $ $ 385,000 1,006,000 1,096,000 $ 2,487,000 $ 336,000 1,006,000 1,212,000 $2,554,000 Joel...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance 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 Total liabilities and stockholders' equity 131,000 334,000 560,000 865,000 407,000 251,000 $ 2,548,000 $ 135,000 480,000 470,000 845,000 433,000 247,000 $ 2,610,000 $ 383,000 973,000 1,192,000 $ 2,548,000 $ 332,000 973,000 1,305,000...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 136,000 $ 133,000 Accounts receivable 340,000 479,000 Inventory 567,000 485,000 Plant and equipment, net 847,000 833,000 Investment in Buisson, S.A. 402,000 427,000 Land (undeveloped) 245,000 253,000 Total assets $ 2,537,000 $ 2,610,000 Liabilities and Stockholders' Equity Accounts payable $ 374,000 $ 343,000 Long-term debt 1,024,000 1,024,000 Stockholders' equity 1,139,000 1,243,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 126,000 $ 137,000 Accounts receivable 332,000 474,000 Inventory 561,000 490,000 Plant and equipment, net 861,000 819,000 Investment in Buisson, S.A. 395,000 432,000 Land (undeveloped) 251,000 245,000 Total assets $ 2,526,000 $ 2,597,000 Liabilities and Stockholders' Equity Accounts payable $ 390,000 $ 335,000 Long-term debt 969,000 969,000 Stockholders' equity 1,167,000 1,293,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 134,000 $ 134,000 Accounts receivable 342,000 489,000 Inventory 576,000 472,000 Plant and equipment, net 808,000 805,000 Investment in Buisson, S.A. 404,000 429,000 Land (undeveloped) 252,000 248,000 Total assets $ 2,516,000 $ 2,577,000 Liabilities and Stockholders' Equity Accounts payable $ 373,000 $ 348,000 Long-term debt 998,000 998,000 Stockholders' equity 1,145,000 1,231,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow:
Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance
Assets Cash $ 137,000 $ 128,000 Accounts receivable 334,000 480,000
Inventory 578,000 480,000 Plant and equipment, net 881,000 882,000
Investment in Buisson, S.A. 398,000 430,000 Land (undeveloped)
247,000 252,000 Total assets $ 2,575,000 $ 2,652,000 Liabilities
and Stockholders' Equity Accounts payable $ 384,000 $ 340,000
Long-term debt 984,000 984,000 Stockholders' equity 1,207,000
1,328,000 Total liabilities and stockholders' equity $...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
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
$
132,000
Accounts receivable
340,000
479,000
Inventory
577,000
476,000
Plant and equipment, net
794,000
793,000
Investment in Buisson, S.A.
401,000
427,000
Land (undeveloped)
255,000
249,000
Total assets
$
2,496,000
$
2,556,000
Liabilities and Stockholders'
Equity
Accounts payable
$
389,000
$
344,000
Long-term debt
971,000
971,000
Stockholders' equity
1,136,000
1,241,000
Total liabilities and stockholders' equity
$...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance 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 Total liabilities and stockholders' equity 133,000 344,000 579,000 804,000 410,000 247,000 $ 2,517,000 $ 134,000 477,000 487,000 802,000 431,000 254,000 $2,585,000 $ 374,000 990,000 1,153,000 $ 2,517,000 $ 331,000 990,000 1,264,000 $2,585,000...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance Sheet
Beginning
Balance
Ending
Balance
Assets
Cash
$
127,000
$
136,000
Accounts receivable
349,000
484,000
Inventory
569,000
490,000
Plant and equipment, net
835,000
810,000
Investment in Buisson, S.A.
394,000
433,000
Land (undeveloped)
251,000
249,000
Total assets
$
2,525,000
$
2,602,000
Liabilities and Stockholders'
Equity
Accounts payable
$
387,000
$
346,000
Long-term debt
952,000
952,000
Stockholders' equity
1,186,000
1,304,000
Total liabilities and stockholders' equity
$...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance 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 Total liabilities and stockholders' equity 126,000 333,000 573,000 808,000 398,000 249,000 2,487,000 130,000 481,000 479,000 790,000 425,000 249,000 2,554,000 $ $ 385,000 1,006,000 1,096,000 $ 2,487,000 $ 336,000 1,006,000 1,212,000 $2,554,000 Joel...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance 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 Total liabilities and stockholders' equity 131,000 334,000 560,000 865,000 407,000 251,000 $ 2,548,000 $ 135,000 480,000 470,000 845,000 433,000 247,000 $ 2,610,000 $ 383,000 973,000 1,192,000 $ 2,548,000 $ 332,000 973,000 1,305,000...
Financial data for Joel de Paris, Inc., for last year follow:
Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance
Assets Cash $ 137,000 $ 128,000 Accounts receivable 334,000 480,000
Inventory 578,000 480,000 Plant and equipment, net 881,000 882,000
Investment in Buisson, S.A. 398,000 430,000 Land (undeveloped)
247,000 252,000 Total assets $ 2,575,000 $ 2,652,000 Liabilities
and Stockholders' Equity Accounts payable $ 384,000 $ 340,000
Long-term debt 984,000 984,000 Stockholders' equity 1,207,000
1,328,000 Total liabilities and stockholders' equity $...
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
$
132,000
Accounts receivable
340,000
479,000
Inventory
577,000
476,000
Plant and equipment, net
794,000
793,000
Investment in Buisson, S.A.
401,000
427,000
Land (undeveloped)
255,000
249,000
Total assets
$
2,496,000
$
2,556,000
Liabilities and Stockholders'
Equity
Accounts payable
$
389,000
$
344,000
Long-term debt
971,000
971,000
Stockholders' equity
1,136,000
1,241,000
Total liabilities and stockholders' equity
$...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance 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 Total liabilities and stockholders' equity 133,000 344,000 579,000 804,000 410,000 247,000 $ 2,517,000 $ 134,000 477,000 487,000 802,000 431,000 254,000 $2,585,000 $ 374,000 990,000 1,153,000 $ 2,517,000 $ 331,000 990,000 1,264,000 $2,585,000...
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance Sheet
Beginning
Balance
Ending
Balance
Assets
Cash
$
127,000
$
136,000
Accounts receivable
349,000
484,000
Inventory
569,000
490,000
Plant and equipment, net
835,000
810,000
Investment in Buisson, S.A.
394,000
433,000
Land (undeveloped)
251,000
249,000
Total assets
$
2,525,000
$
2,602,000
Liabilities and Stockholders'
Equity
Accounts payable
$
387,000
$
346,000
Long-term debt
952,000
952,000
Stockholders' equity
1,186,000
1,304,000
Total liabilities and stockholders' equity
$...
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