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Category > Accounting Posted 17 Aug 2017 My Price 14.00

Cole Corporation

Cole Corporation operates three investment centers. The following financial statements apply to the investment center named Morrison Division.

 

MORRISON DIVISION
Income Statement
For the Year Ended December 31, 2014

  Sales revenue

$

135,000

  

     Cost of goods sold

  

78,500

  
       

  Gross margin

  

56,500

  

  Operating expenses

      

     Selling expenses

  

(5,000

)

     Depreciation expense

  

(8,000

)
       

  Operating income

  

43,500

  

  Nonoperating item

      

     Loss of sale of land

  

(15,000

)
       

  Net income

$

28,500

  
       
 

 

MORRISON DIVISION
Balance Sheet
As of December 31, 2014

  Assets

      

     Cash

$

18,580

  

     Accounts receivable

  

42,266

  

     Merchandise inventory

  

37,578

  

     Equipment less accum. dep.

  

90,258

  

     Nonoperating assets

  

9,000

  
       

  Total assets

$

197,682

  
       

  Liabilities

      

     Accounts payable

$

9,637

  

     Notes payable

  

72,000

  

  StockholdersAc€?c equity

      

     Common stock

  

80,000

  

     Retained earnings

  

36,045

  
       

  Total liab. and stk. equity

$

197,682

  
       
 

 

Required:

 

c.

Calculate the ROI for Morrison. (Round your answer to 2 decimal places. (i.e., .2345 should be entered as 23.45).)

 

Original ROI____%
         

 

Cole has a desired ROI of 10 percent. Headquarters has $96,000 of funds to assign to its investment centers. The manager of the Morrison Division has an opportunity to invest the funds at an ROI of 12 percent. The other two divisions have investment opportunities that yield only 11 percent.

 

d.

Calculate the new ROI for Morrison division, if the investment opportunity is adopted by Morrison.(Round your answer to 2 decimal places. (i.e., .2345 should be entered as 23.45))

 

New ROI ____%
        

 

e-1.

Based on the original data calculate the residual income. (Round your answer to the nearest dollar amount.)

 

Original Residual Income_____
        

 

e-2.

Calculate the new residual income based on information provided in requirement d. (Round your answer to the nearest dollar amount.)

New Residual Income _______

Answers

Maurice Tutor
(5)
Status NEW Posted 17 Aug 2017 06:08 PM My Price 14.00

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