Problem # 2 Financial data for Bravo Company for last year appear below: Bravo...
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Accounting
Problem # 2
Financial data for Bravo Company for last year appear below:
Bravo Company
Statement of Financial Position
Beginning Balance
Ending Balance
Assets
Cash
500,000
700,000
Accounts Receivable
200,000
250,000
Inventory
300,000
350,000
Plant and equipment (net)
1,200,000
1,100,000
Investment in Charlie Company
800,000
1,000,000
Land (undeveloped)
1,700,000
1,700,000
Total Assets
4,700,000
5,100,000
Liabilities and owners' equity
Accounts Payable
700,000
900,000
Long-term Debt
2,500,000
2,500,000
Owners' equity
1,500,000
1,700,000
Total Liabilities and Owners' Equity
4,700,000
5,100,000
Bravo Company
Income Statement
Sales
4,140,000
Less: Operating Expenses
3,519,000
Net Operating Income
621,000
Less: Interest Expense
300,000
Tax Expense
100,000
400,000
Net Income
221,000
The company paid dividends of 21,100 last year. The "Investment in Charlie Company" on the statement of financial position represents an investment in the stock of another company.
Required:
Compute the company's margin, turnover, and return on investment for last year.
The Board of Directors of Bravo Company have set a minimum required return of 20%. What was the company's residual income last year?
Answer & Explanation
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