Managerial Accounting: P10-2 Financial data for Joel de Paris, Inc.

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Managerial Accounting

P10-2A Return on Investment (ROI) and Residual Income
Financial data for Joel de Paris, Inc., for last year follow:
Joel de Paris, Inc.
Balance Sheet
Beginning Balance   Ending Balance
Assets
Cash  135,000   205,000
Accounts receivable  540,000   455,000
Inventory  360,000   310,000
Plant and equipment, net  585,000   610,000
Investment in Buisson, S.A.  270,000   245,000
Land (undeveloped)  190,000   180,000
Total assets  $2,080,000   $2,005,000

Liabilities and Stockholders’ Equity
Accounts payable  285,000   370,000
Long-term debt  1,700,000   1,600,000
Stockholders’ equity  95,000   35,000
Total liabilities and stockholders’ equity  $2,080,000   $2,005,000

Joel de Paris, Inc.
Income Statement
Sales  4,000,000
Operating expenses  3,680,000
Net operating income  320,000
Interest and taxes:
Interest expense  160,000
Tax expense  70,000   230,000
Net income  $90,000

The company paid dividends of $30,000 last year. The “Investment in Buisson, S.A.” on the balance sheet represents an investment in the stock of another company.

Required:
1. Compute the company’s margin, turnover, and return on investment (ROI) for last year.(Round your answers to 2 decimal places.)
2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 19%. What was the company’s residual income last year?

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