Question

I need correct Answers ASAP Please..

2

A division's operating data for the past two years is as follows:

	Year 1	Year 2
Return on investment	14%	18%
Net operating income	?	$180,000
Turnover	?	2
Margin	?	?
Sales	$1,000,000	?

In Year 2 the margin was twice as much as the margin in Year 1. How much was the division’s Net Operating Income for Year 1?

Multiple Choice

• $180,000

• $140,000

• $45,000

• $90,000

3. Financial data for Guyer Corporation, for last year follow:

Guyer Corporation Balance Sheet
	Beginning Balance			Ending Balance
Assets
Cash	$	140,000		$	120,000
Accounts receivable		450,000			530,000
Inventory		320,000			380,000
Plant and equipment, net		680,000			680,000
Investment in ABC, Inc.		250,000			280,000
Land (undeveloped)		180,000			170,000
Total assets	$	2,020,000		$	2,160,000
Liabilities and Stockholders' Equity
Accounts payable	$	360,000		$	310,000
Long-term debt		1,500,000			1,500,000
Stockholders' equity		160,000			350,000
Total liabilities and stockholders' equity	$	2,020,000		$	2,160,000

Guyer Corporation Income Statement
Sales					$	4,050,000
Operating expenses						3,630,000
Net operating income						420,000
Interest and taxes:
Interest expense	$	150,000
Tax expense		110,000				260,000
Net income					$	160,000

The company paid dividends of $15,000 last year. The “Investment in ABC, Inc.” on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 9%.

What was the company’s residual income last year?

Multiple Choice

• $-34,400

• $225,600

• $271,500

• $11,500

Answer 1

ans	Year 2
Return on investment	18%
Net operating income	180000
Turnover	2
Turnover *Margin=18% ROI
2*M=18%
margin=9%
For year 1 Margin is 9%/2=4.5%
Net operaying income=Sales*margin
1000000*4.5%	45000
Option B $45000 is correct
ans 2
Option C	$271500
Residual income
Net opearting income-(Min req rate of return*operating assets)
420000-(9%*1650000)	271500
Average operating assets	Beginning	Ending
Cash	140000	1,20,000
Accounts receivable	450000	5,30,000
Inventory	320000	3,80,000
Plant and equipment, net	680000	6,80,000	Average total/2
Total	1590000	1710000	1650000
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