Financial data for Joel de Paris, Inc., for last year follow: The company paid d

Question

Financial data for Joel de Paris, Inc., for last year follow:

The company paid dividends of $188,080 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?

Joel de Paris, Inc.
Balance Sheet Beginning
Balance Ending
Balance Assets Cash $ 136,000 $ 125,000 Accounts receivable 350,000 487,000 Inventory 576,000 481,000 Plant and equipment, net 838,000 847,000 Investment in Buisson, S.A. 392,000 430,000 Land (undeveloped) 254,000 248,000 Total assets $ 2,546,000 $ 2,618,000 Liabilities and Stockholders' Equity Accounts payable $ 376,000 $ 341,000 Long-term debt 1,038,000 1,038,000 Stockholders' equity 1,132,000 1,239,000 Total liabilities and stockholders' equity $ 2,546,000 $ 2,618,000

Explanation / Answer

1 Beginning operating assets=2546000-392000-254000= $1900000 Ending operating assets=2618000-430000-248000= $1940000 Average operating assets=(1900000+1940000)/2= $1920000 2 Margin = Net operating income/Sales=622080/5184000= 12% Turnover = Sales/Average operating assets=5184000/1920000= 2.7 ROI = Margin*Turnover = 12%*2.7= 32.4% 3 Residual income=622080-(1920000*15%)= $334080

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