Financial data for Beaker Company for last year appear below.
| Beaker Company | ||
| Statement of Financial Position | ||
| Beginning | Ending | |
| Balance | 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?
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