Question

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	$	134,000
Accounts receivable		349,000		485,000
Inventory		575,000		474,000
Plant and equipment, net		818,000		817,000
Investment in Buisson, S.A.		400,000		432,000
Land (undeveloped)		254,000		253,000
Total assets	$	2,524,000	$	2,595,000
Liabilities and Stockholders' Equity
Accounts payable	$	375,000	$	336,000
Long-term debt		994,000		994,000
Stockholders' equity		1,155,000		1,265,000
Total liabilities and stockholders' equity	$	2,524,000	$	2,595,000

Joel de Paris, Inc. Income Statement
Sales		$	4,725,000
Operating expenses			3,969,000
Net operating income			756,000
Interest and taxes:
Interest expense	$ 116,000
Tax expense	193,000		309,000
Net income		$	447,000

     The company paid dividends of $337,000 last year. The “Investment in Buisson, S.A.,” on the balance sheet represents an investment in the stock of another company.

Required:
1.	Compute the company’s margin, turnover, and return on investment (ROI) for last year. (Round your answers to 2 decimal places.)

       

2.	The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 17%. What was the company’s residual income last year?

Pleasee help me I posted this question before and all the answers were wrong

Answer 1

a. Margin=Net Operating Income /Sales

=756000/4725000=16%

b. Turnover= Sales / Average Operating Asset

=4725000/1890000= 2.5

Average operating Asset= [( Opening Total Asset -Land-Investment)+(Closing Total Asset - Land -Investment )]/2

= [(2524000-254000-400000)+(2595000-432000-253000)]/2

=(1870000+1910000)/2=1890000

c. Return on Income =(Net Operating Income / Average Operating Asset )X100

=756000/1890000X100=40%

Particular	Amount
Net Operating Income	$7,56,000
Less: Min. Required Return on Average operating Asset (1890000*17%)	$3,21,300
Residual Income	$4,34,700