Question

21. Financial data for Beaker Company for last year appear below: Beaker Company Statements of Financial...

21.

Financial data for Beaker Company for last year appear below:

Beaker Company
Statements of Financial Position
Beginning Balance Ending Balance
Assets:
Cash $ 331,000 $ 505,256
Accounts receivable 169,000 185,000
Inventory 263,000 228,000
Plant and equipment (net) 451,000 388,000
Investment in Cedar Company 266,000 288,000
Land (undeveloped) 365,000 365,000
Total assets $ 1,845,000 $ 1,959,256
Liabilities and owners' equity:
Accounts payable $ 190,000 $ 189,000
Long-term debt 868,000 868,000
Owners' equity 787,000 902,256
Total liabilities and owners' equity $ 1,845,000 $ 1,959,256
Beaker Company
Income Statement
Sales $ 2,080,000
Less operating expenses 1,518,400
Net operating income 561,600
Less interest and taxes:
Interest expense $ 100,400
Tax expense 190,944 291,344
Net income $ 270,256

The company paid dividends of $155,000 last year. The "Investment in Cedar Company" on the statement of financial position represents an investment in the stock of another company.

Required:

a. Compute the company's margin, turnover, and return on investment for last year.

b. The Board of Directors of Beaker Company has set a minimum required return of 40%. What was the company's residual income last year?

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