Financial Data For Beaker Company

Financial data for Beaker Company for last year appear below.

Beaker Company
Statement of Financial Position
  Beginning Ending
  Balance Balance
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.


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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