FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
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 |
|
|
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 |
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Hunger Games Company |
||
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Income Statement |
||
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Sales |
|
$4,500,000 |
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Less operating expenses |
|
4,000,000 |
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Net operating income |
|
500,000 |
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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
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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