21 Financial data for Hunger Games Company for last year appear below:   Hunger Games Company Statements of Financial Position   Beginning Balance Ending Balance Assets:     Cash $120,700 $220,000 Accounts receivable 225,000 475,000 Inventory 317,000 390,000 Plant and equipment (net) 940,000 860,000 Investment in Katniss Company 100,000 98,000 Land (undeveloped) 198,000 65,000 Total assets $1,900,700 $2,108,000 Liabilities and owners' equity:     Accounts payable $178,700 $8,000 Long-term debt 512,000 600,000 Owners' equity 1,210,000 1,500,000 Total liabilities and owners' equity $1,900,700 $2,108,000   Hunger Games Company Income Statement Sales   $4,500,000 Less operating expenses   4,000,000 Net operating income   500,000 Less interest and taxes:     Interest expense $97,000   Tax expense 127,000 224,000 Operating Income   $276,000   The "Investment in Katniss Company" on the statement of financial position represents an investment in the stock of another company.Required: 1. Compute the company's margin, turnover, and return on investment for last year. 2. The Board of Directors of Hunger Games Company have set a minimum required return of 15%. What was the company's residual income last year?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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21

Financial data for Hunger Games Company for last year appear below:

 

Hunger Games Company

Statements of Financial Position

 

Beginning Balance

Ending Balance

Assets:

 

 

Cash

$120,700

$220,000

Accounts receivable

225,000

475,000

Inventory

317,000

390,000

Plant and equipment (net)

940,000

860,000

Investment in Katniss Company

100,000

98,000

Land (undeveloped)

198,000

65,000

Total assets

$1,900,700

$2,108,000

Liabilities and owners' equity:

 

 

Accounts payable

$178,700

$8,000

Long-term debt

512,000

600,000

Owners' equity

1,210,000

1,500,000

Total liabilities and owners' equity

$1,900,700

$2,108,000

 

Hunger Games Company

Income Statement

Sales

 

$4,500,000

Less operating expenses

 

4,000,000

Net operating income

 

500,000

Less interest and taxes:

 

 

Interest expense

$97,000

 

Tax expense

127,000

224,000

Operating Income

 

$276,000

 

The "Investment in Katniss Company" on the statement of financial position represents an investment in the stock of another company.

Required:

1. Compute the company's margin, turnover, and return on investment for last year.

2. The Board of Directors of Hunger Games Company have set a minimum required return of 15%. What was the company's residual income last year?

 

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