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8/22/2020 Assignment Print View

https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=3.&postSubmissionView=13252713639811419&wid=13252713905909241&rol… 1/2

3. Award: 7.00 points

Financial data for Joel de Paris, Inc., for last year follow:

Joel de Paris, Inc. Balance Sheet

BeginningBalance Ending Balance

Assets Cash $ 127,000 $ 129,000 Accounts receivable 333,000 486,000 Inventory 580,000 485,000 Plant and equipment, net 800,000 780,000 Investment in Buisson, S.A. 396,000 433,000 Land (undeveloped) 253,000 247,000 Total assets $ 2,489,000 $ 2,560,000 Liabilities and Stockholders’ Equity Accounts payable $ 376,000 $ 336,000 Long-term debt 1,023,000 1,023,000 Stockholders’ equity 1,090,000 1,201,000 Total liabilities and stockholders’ equity $ 2,489,000 $ 2,560,000

Joel de Paris, Inc. Income Statement

Sales $ 4,836,000 Operating expenses 4,013,880 Net operating income 822,120 Interest and taxes:

Interest expense $ 122,000 Tax expense 205,000 327,000

Net income $ 495,120

The company paid dividends of $384,120 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. (Do not round intermediate calculations and round your final answers to 2 decimal places.) 3. What was the company’s residual income last year?

 

 

8/22/2020 Assignment Print View

https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=3.&postSubmissionView=13252713639811419&wid=13252713905909241&rol… 2/2

1. Average operating assets

2. Margin %

Turnover

ROI %

3. Residual income

References

Worksheet Learning Objective: 10-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI.

Difficulty: 2 Medium

Learning Objective: 10-02 Compute residual income and understand its strengths and weaknesses.