Problem 12-15 Return on Investment (ROI) and Residual Income [LO12-1, LO12-2] Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 129,000 $ 140,000 Accounts receivable 336,000 473,000 Inventory 561,000 477,000 Plant and equipment, net 834,000 810,000 Investment in Buisson, S.A. 400,000 432,000 Land (undeveloped) 254,000 247,000 Total assets $ 2,514,000 $ 2,579,000 Liabilities and Stockholders' Equity Accounts payable $ 384,000 $ 346,000 Long-term debt 967,000 967,000 Stockholders' equity 1,163,000 1,266,000 Total liabilities and stockholders' equity $ 2,514,000 $ 2,579,000 Joel de Paris, Inc. Income Statement Sales $ 4,324,000 Operating expenses 3,805,120 Net operating income 518,880 Interest and taxes: Interest expense 124,000 Tax expense 193,000 317,000 Net income $ 201,880 The company paid dividends of $98,880 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 1 decimal place.) 2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 22%. What was the company’s residual income last year?

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ISBN:9781337671743

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Chapter15: Managing Short-term Assets

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Problem 12-15 Return on Investment (ROI) and Residual Income [LO12-1, LO12-2]

Financial data for Joel de Paris, Inc., for last year follow:

Joel de Paris, Inc. Balance Sheet
	Beginning Balance	Ending Balance
Assets
Cash	$	129,000	$	140,000
Accounts receivable		336,000		473,000
Inventory		561,000		477,000
Plant and equipment, net		834,000		810,000
Investment in Buisson, S.A.		400,000		432,000
Land (undeveloped)		254,000		247,000
Total assets	$	2,514,000	$	2,579,000
Liabilities and Stockholders' Equity
Accounts payable	$	384,000	$	346,000
Long-term debt		967,000		967,000
Stockholders' equity		1,163,000		1,266,000
Total liabilities and stockholders' equity	$	2,514,000	$	2,579,000

Joel de Paris, Inc. Income Statement
Sales		$	4,324,000
Operating expenses			3,805,120
Net operating income			518,880
Interest and taxes:
Interest expense	124,000
Tax expense	193,000		317,000
Net income		$	201,880

The company paid dividends of $98,880 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 1 decimal place.)

2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 22%. What was the company’s residual income last year?

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