Solution-What was the companys residual income last year

What was the companys residual income last year

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Reference no: EM131691166

Financial data for Redstone Company for last year appear below:

Redstone Company
Statements of Financial Position

Assets:	Beginning Balance	Ending Balance
Cash..............................................................	$120,000	$160,000
Accounts receivable.................................	110,000	100,000
Inventory.......................................................	50,000	60,000
Plant and equipment (net).......................	180,000	160,000
Investment in Balsam Company...........	50,000	60,000
Land (undeveloped).................................	120,000	120,000
Total assets.................................................	$630.000	$660 000
Liabilities and owners' equity:
Accounts payable....................................	$ 70,000	$ 90,000
Long-term debt..........................................	500,000	500,000
Owners' equity...........................................	60.000	70.000
Total liabilities and owners' equity........	$630.000	$660.000

Redstone Company
Income Statement

Sales............................................		$1,222,000
Less operating expenses......		1,099,800
Net operating income..............		122,200
Less interest and taxes:
Interest expense....................	$60,000
Tax expense...........................	20,000	80,000
Net income.................................		$ 42.200

The company paid dividends of $32,200 last year. The "Investment in Balsam 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.

b. The Board of Directors of Redstone has set a minimum required return of 25%. What was the company's residual income last year?

Reference no: EM131691166

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What was the companys residual income last year

Reference no: EM131691166

Reference no: EM131691166

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