Chapter 11 Graded Problems Help Save & Exit 2 Check Financial data for Joel de P
ID: 2587953 • Letter: C
Question
Chapter 11 Graded Problems Help Save & Exit 2 Check Financial data for Joel de Paris, Inc. for last year follow de Parin Balance Sheet 15 points Beginaing Skipped Seta Cash Accounts receivable Inventory Plant and equipment, net Investnent in Buisson, S.A Land (undeveloped) Total asseta 450,000 320,000 680,000 250,000 000 140,000120,000 530,000 38o,000 620,000 280,000 32.020,000 2,100.000 Liabilities and Steckholders Equity Accounts payable tong-term debt Stoakholders' equity Total 1iabilities and atockholders equity 360,000310,000 1,500,000 500,000 160,00020,000 2,020,000 2,100, 000 Print 1 de Paria, Ine. Inoone Statement 4,050,000 ales Operating expenses Net operating income Interest and taXes 3.665,000 05,000 260.000- 245,000 Tax xppense 150,000 110,00 Net incone The company paid dividends of $15,000 last yeat. The "investment in Buisson, S.A.- the stock of another company. The company's minimum required rate of return of 15%. on the balance sheet represents an investment in Required: 1 Comnute the comnanvs averace onerating assets for last K Prex 2 or 2 NextExplanation / Answer
1.computation of average operating assets for last year:
Operating assets are those assets acquired for the use in the conduct of on going operations of business.
The assets normally included in the calculation of average operating assets are cash, prepaid expenses, accounts receivable, inventory, and fixed assets.do not include assets which are not part of operating process.
Average operating assets= Total operating assets beginning of the period+ total operating assets end of the period/2
Land is undeveloped so it is treated as not part of operating asset.investment in bussion also non operating investment.
Average operating assets = 1590000+1650000/2
= 1620000.
2.computation of company margin, turnover,and ROI.
Profit margin= net income/net sales
= 145000/4050000*100= 3.58
Company turn over:
Business turnover is a numeric value representing total sales. It is essentially the value of sales you make in a set period. It is generally measured over a year's period, whether that's the calendar year, tax year or fiscal year.
Company turn over during the period is total sales
= 4,050,000.
ROI:= net operating revenue/average operating assets
= 405000/1620000*100
= 25%
3.residual income:
Residual income is a managerial accounting measurement used to assess and compare the relative success of business units. The basic formula for calculating residual income is to multiply operating assets by the cost of capital, and then subtract this value from operating income. By adjusting income by the cost of capital, Residual income shows the rate of return on invested assets.
= Net operating income-(operating assets * cost of capital)
= 405000-(1620000*15%)
= 162000 is the residual income.
This shows opportunity cost of entity.
Particulars beginning balance ending balance Cash 140000 120000 Account receivable 450000 530000 Inventory 320000 380000 Plant & equipment 680000 620000 Total 1590000 1650000Related Questions
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