Financial data for Joel de Paris, Inc., for last year follow:
Joel de Paris, Inc. Balance Sheet |
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Beginning Balance |
Ending Balance |
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Assets | ||||||
Cash | $ | 139,000 | $ | 131,000 | ||
Accounts receivable | 349,000 | 475,000 | ||||
Inventory | 576,000 | 473,000 | ||||
Plant and equipment, net | 796,000 | 821,000 | ||||
Investment in Buisson, S.A. | 393,000 | 430,000 | ||||
Land (undeveloped) | 251,000 | 246,000 | ||||
Total assets | $ | 2,504,000 | $ | 2,576,000 | ||
Liabilities and Stockholders' Equity | ||||||
Accounts payable | $ | 381,000 | $ | 335,000 | ||
Long-term debt | 1,049,000 | 1,049,000 | ||||
Stockholders' equity | 1,074,000 | 1,192,000 | ||||
Total liabilities and stockholders' equity | $ | 2,504,000 | $ | 2,576,000 | ||
Joel de Paris, Inc. Income Statement |
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Sales | $ | 4,136,000 | |||||||
Operating expenses | 3,515,600 | ||||||||
Net operating income | 620,400 | ||||||||
Interest and taxes: | |||||||||
Interest expense | $ | 121,000 | |||||||
Tax expense | 205,000 | 326,000 | |||||||
Net income | $ | 294,400 | |||||||
The company paid dividends of $176,400 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?
Answer to Requirement 1:
Beginning operating assets = Cash + Accounts receivable +
Inventory + Plant and equipment, net
Beginning operating assets = $139,000 + $349,000 + $576,000 +
$796,000
Beginning operating assets = $1,860,000
Ending operating assets = Cash + Accounts receivable + Inventory
+ Plant and equipment, net
Ending operating assets = $131,000 + $475,000 + $473,000 +
$821,000
Ending operating assets = $1,900,000
Average operating assets = (Ending operating assets + Beginning
operating assets) / 2
Average operating assets = ($1,900,000 + $1,860,000) / 2
Average operating assets = $1,880,000
Answer to Requirement 2:
Margin = Net operating income / Sales
Margin = $620,400 / $4,136,000
Margin = 0.15 or 15.00%
Turnover = Sales / Average operating assets
Turnover = $4,136,000 / $1,880,000
Turnover = 2.20
Return on investment = Margin * Turnover
Return on investment = 15.00% * 2.20
Return on investment = 33.00%
Answer to Requirement 3:
Residual income = Net operating income - Required rate of return
* Average operating assets
Residual income = $620,400 - 0.15 * $1,880,000
Residual income = $620,400 - $282,000
Residual income = $338,400
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 $ 130,000 $ 139,000 Accounts receivable 346,000 487,000 Inventory 567,000 487,000 Plant and equipment, net 817,000 787,000 Investment in Buisson, S.A. 392,000 430,000 Land (undeveloped) 255,000 246,000 Total assets $ 2,507,000 $ 2,576,000 Liabilities and Stockholders' Equity Accounts payable $ 380,000 $ 339,000 Long-term debt 977,000 977,000 Stockholders' equity 1,150,000 1,260,000 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 $ 128,000 $ 136,000 Accounts receivable 339,000 478,000 Inventory 561,000 483,000 Plant and equipment, net 892,000 863,000 Investment in Buisson, S.A. 405,000 431,000 Land (undeveloped) 251,000 245,000 Total assets $ 2,576,000 $ 2,636,000 Liabilities and Stockholders' Equity Accounts payable $ 371,000 $ 334,000 Long-term debt 983,000 983,000 Stockholders' equity 1,222,000 1,319,000 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 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 $ 130,000 $ 139,000 Accounts receivable 344,000 486,000 Inventory 565,000 473,000 Plant and equipment, net 821,000 802,000 Investment in Buisson, S.A. 401,000 431,000 Land (undeveloped) 249,000 250,000 Total assets $ 2,510,000 $ 2,581,000 Liabilities and Stockholders' Equity Accounts payable $ 384,000 $ 346,000 Long-term debt 1,008,000 1,008,000 Stockholders' equity 1,118,000 1,227,000 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 128,000 332,000 574,000 826,000 404,000 252,000 2,516,000 130,000 475,000 489,000 806,000 426,000 248,000 2,574,000 $ $ $ 376,000 956,000 1,184,000 $ 2,516,000 $ 344,000 956,000...
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 $ 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 $ 135,000 $ 136,000 Accounts receivable 337,000 475,000 Inventory 573,000 487,000 Plant and equipment, net 865,000 852,000 Investment in Buisson, S.A. 401,000 426,000 Land (undeveloped) 250,000 253,000 Total assets $ 2,561,000 $ 2,629,000 Liabilities and Stockholders' Equity Accounts payable $ 376,000 $ 337,000 Long-term debt 986,000 986,000 Stockholders' equity 1,199,000 1,306,000 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 $ 139,000 $ 132,000 Accounts receivable 344,000 484,000 Inventory 566,000 481,000 Plant and equipment, net 851,000 843,000 Investment in Buisson, S.A. 393,000 430,000 Land (undeveloped) 251,000 246,000 Total assets $ 2,544,000 $ 2,616,000 Liabilities and Stockholders' Equity Accounts payable $ 375,000 $ 340,000 Long-term debt 963,000 963,000 Stockholders' equity 1,206,000 1,313,000 Total liabilities and stockholders' equity $...