Question

Beaker Company
Statements of Financial Position
	Beginning Balance			Ending Balance
Assets:
Cash	$	256,000		$	231,240
Accounts receivable		144,000			192,000
Inventory		310,000			240,000
Plant and equipment (net)		492,000			445,000
Investment in Cedar Company		301,000			286,000
Land (undeveloped)		280,000			280,000
Total assets	$	1,783,000		$	1,674,240
Liabilities and owners' equity:
Accounts payable	$	214,000		$	238,000
Long-term debt		810,000			810,000
Owners' equity		759,000			626,240
Total liabilities and owners' equity	$	1,783,000		$	1,674,240

Beaker Company
Income Statement
Sales				$	2,060,000
Less operating expenses					1,854,000
Net operating income					206,000
Less interest and taxes:
Interest expense	$	96,900
Tax expense		63,860			160,760
Net income				$	45,240

The company paid dividends of  $178,000 last year. The "Investment in Cedar Company" on the statement of financial position represents an investment in the stock of another company.

Additionally; The Board of Directors of Beaker Company has set a minimum required return of 15%.

Please calculate the following:

Average Operating Assets (rounded to the nearest whole dollar, with commas)	$
Operating Income (rounded to the nearest whole dollar, with commas)	$
Sales (rounded to the nearest whole dollar with commas)	$
Margin (rounded to the 2 decimal places)	%
Turnover (rounded to 2 decimal places)
Return On Investment (rounded to 2 decimal places)	%
Residual Income (rounded to the nearest whole dollar, with commas)

Answer 1

1) Average Operating Assets=Opening Balance + Closing Balance /2

=$1783,000+$1674,240=$1728620

2) Operating Income=$206,000

3) Sales=$2060,000

4) Margin=Net Profit/Sales=$45,240/$20,60,000*100=2.20%

5) Turnover Ratio=Sales/Average Assets=$2060,000/17,28,620=1.19

6)Return on Investments=Net Income/Average Assets=$45,240/$1728620*100=$2.62%

7) Residual Income= Residual Income = Net operating Income - Required Return

Required Return=Average assets* Required rate of return=$1728,620*15%=$259,293

=$206,000-$259,293= -$53,293