Chapter 11 6 3 Joel de Paris, Inc. Balance Sheet 10 points Beginning Balance End

Question

Chapter 11 6 3 Joel de Paris, Inc. Balance Sheet 10 points Beginning Balance Ending Balance Assets Cash Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A. Land (undeveloped) Total assets Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity Total liabilities and stockholders' equity $ 133,000 126,000 478,000 484,000 782,000 434,000 249,000 $2,491,000 $2,553,000 Skippe 337,000 564,000 796,000 407,000 254,000 eBook Print $ 376,000 $ 335,000 1,036,000 1,036,000 1,079,000 1,182,000 Reference $2,491,000 $2,553,000 Joel de Paris, Inc. Income Statement $4,255,000 3,531,650 Sales Operating expenses Net operating income Interest and taxes: 723,350 Interest expense $123,000 Tax expense_198,000 321,000 $ 402,350 Net income The company paid dividends of $299,350 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? Average operating assets 2. Margin Turnover ROI 3. Residual income

Explanation / Answer

1 Beginning operating assets=2491000-407000-254000= $1830000 Ending operating assets=2553000-434000-249000= $1870000 Average operating assets=(1830000+1870000)/2= $1850000 2 Margin = Net operating income/Sales=723350/4255000= 17% Turnover = Sales/Average operating assets=4255000/1850000= 2.3 ROI = Margin*Turnover = 17%*2.3= 39.1% 3 Residual income=723350-(1850000*15%)= $445850

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