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Tomtit [17]
3 years ago
14

Calculating Average Operating Assets, Margin, Turnover, and Return on Investment East Mullett Manufacturing earned operating inc

ome last year as shown in the following income statement: Sales $531,250 Cost of goods sold 280,000 Gross margin $251,250 Selling and administrative expense 195,500 Operating income $55,750 Less: Income taxes (@ 40%) 22,300 Net income $33,450 At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000. Required: For East Mullett Manufacturing, calculate the following: 1. Average operating assets $ 2. Margin (round to two decimal places) % 3. Turnover (round to two decimal places) 4. Return on investment (round to one decimal place)
Business
1 answer:
Nady [450]3 years ago
3 0

Answer:

1.  $425,000

2. 10.49%

3. 1.25

4. 13.11%

Explanation:

The computations are shown below:

1. For Average operating assets

=  (Beginning Operating Assets + Ending Operating Assets) ÷ 2

= (390,000 + 460,000) ÷ 2

= $425,000

2. For margin:

= Net Operating Income ÷ Sales × 100

= $55,750 ÷ $531,250 × 100

= 10.49%

3. For turnover:

= Sales ÷ Average Operating Assets

= $531,250 ÷ $425,000

= 1.25

4. For return on investment:

= Net Operating Income ÷ Average Operating Assets

= $55,750 ÷ $425,000

= 13.11%

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Explanation:

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Shamrock Company had the following information available at the end of 2014.
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Answer and Explanation:

The preparation is presented below:      

                                                Shamrock Company

                                            Statement of Cash Flows

                                 For the Year Ended December 31, 2014

                                                  (Direct Method)

Cash flows from operating activities

Cash receipts:  

Cash received from customers $1,153,660  

Dividends received                 $2,500

Total cash receipts                         $1,156,160

Cash payments:  

Cash paid to suppliers                  $762,690  

Cash paid for operating expenses $225,230  

Taxes paid                                     $39,920  

Interest paid                                       $61,776

Total cash payments                           -$1,089,616

Net cash provided by operating activities  $66,544

Cash flows from investing activities  

Sale of short-term investments $14,080  

Sale of land $55,590  

Purchase of equipment -$124,570  

Net cash used by investing activities  -$54,900

Cash flows from financing activities  

Proceeds from issuance of common stock $29,526  

Principal payment on long-term debt -$9,580  

Dividends paid -$23,890  

Net cash used by financing activities  -$3,944

Net increase in cash  $7,700

Cash, January 1, 2014  $3,060

Cash, December 31, 2014  $10,760

Working notes

Sales Revenue $1,160,450  

– Increase in Accounts Receivable $6,790  

Cash received from customers $1,153,660  

Cost of Goods Sold $748,980  

+ Increase in Inventory $5,020  

+ Decrease in Accounts Payable $8,690  

Cash paid to suppliers $762,690  

Operating Expenses $275,640  

– Depreciation/Amortization Expense -$39,330  

– Decrease in Prepaid Rent -$110,80  

+ Increase in Prepaid Insurance $1,640  

+ Increase in Office Supplies $520  

– Increase in Wages Payable -$2,160  

Cash paid for Operating Expenses $225,230  

Income tax expense $40,350  

Less:Increase in income taxes payable -$430  

Taxes paid $39,920  

Interest Expense $52,270  

+ Decrease in Bond Premium $9,506  

Interest paid $61,776  

Reconciliation of Net Income to Net Cash Provided by Operating Activities:  

Net income  $58,420

Adjustments made to reconcile net income to net cash provided by operating activities:  

Add: Depreciation expense $39,330  

Add: Decrease in prepaid rent $110,80  

Add: Increase in income taxes payable $430  

Add: Increase in wages payable $2,160  

Less: Increase in accounts receivable -$6,790  

Less: Increase in inventory -$5,020  

Less: Increase in prepaid insurance -$1,640  

Less: Increase in office supplies -$520  

Less: Decrease in accounts payable -$8,690  

Less: Gain on sale of land -$8,320  

Less: Gain on sale of short-term investments -$4,390  

Less: Amortization of bond premium -$9,506  

Total adjustments  $8,124

Net cash provided by operating activities  $66,544

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Beginning work in process inventory     900     $13,000        $5,100

Degree of completion                                               75%              20%

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Total units in production                    10,500

Units completed and transferred       8,500         100%            100%

Ending work in process inventory     2,000           90%              30%

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Beginning work in process inventory     900     $13,000         $5,100

Costs added during the month                         $172,100      $242,100

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Ending work in process inventory     2,000     1,800 (90%)        600 (30%)

Total equivalent units                                      10,300                9,100

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Total production costs                      $185,100           $247,200

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