Financial data for Eastern Surf Company for last year appear below:
Eastern Surf
Statements of Financial Position - the most recent year
Opening Balance
Ending Balance
Assets:
Cash
$34,500
$42,500
Accounts receivable
$29,500
$21,500
Inventory
$42,600
$41,900
Plant and equipment (net)
$475,600
$428,040
Investment in Board-Builder
$100,000
$100,000
Company
Land (underdeveloped)
$375,000
$375,000
Total assets
$1,057,200
$1,008,940
Liabilities and owners' equity:
Accounts payable
$82,200
$13,259
Long-term debt
$625,000
$593,750
Owners' equity
$350,000
$401,931
Total liabilities and owners' equity
$1,057,200
$1,008,940
Eastern Surf
Income Statement
Sales
Less operating expenses
Operating income
$602,500
$497,063
$105,437
Less interest and taxes:
Interest expense
$31,250
Tax expense
$22,256
$53,506
Net Income
$51,931
Version 1
Introductory Management Accounting-Assignment #4 (15%)
The company paid dividends of $3,600 last year. The "Investment in Board Builder 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. (5 marks)
b) The Board of Directors of Beaker Company have set a minimum required return of 17.50%.
What was the company's residual income last year? (5 marks)
