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Exercise Responsibilty

1. Charlie Company had sales of P750,000, operating income of P25,000, and net profit of P8,000 in June. With total assets of P500,000 and shareholders' equity of P200,000, the residual income is calculated. 2. The Western Division of Hinzel Company had sales of P4,000,000, costs of P3,525,000 and expenses of P75,000 last year. With working capital of P625,000 and plant/equipment of P1,775,000, the before-tax return on investment is calculated. 3. Dy Company reports pre-tax income of P4,000,000 with assets of P

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Leo Sandy Ambe Cuis
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71 views1 page

Exercise Responsibilty

1. Charlie Company had sales of P750,000, operating income of P25,000, and net profit of P8,000 in June. With total assets of P500,000 and shareholders' equity of P200,000, the residual income is calculated. 2. The Western Division of Hinzel Company had sales of P4,000,000, costs of P3,525,000 and expenses of P75,000 last year. With working capital of P625,000 and plant/equipment of P1,775,000, the before-tax return on investment is calculated. 3. Dy Company reports pre-tax income of P4,000,000 with assets of P

Uploaded by

Leo Sandy Ambe Cuis
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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RESPONSBILITY ACCOUNTING EXERCISES:

1. The following is the operating statistics of Charlie Company for the month of June:

Sales P750,000
Operating Income 25,000
Net profit after taxes 8,000
Total assets available 500,000
Shareholders’ equity 200,000
Cost of capital 6%

Required: Residual Income

2. Listed below is the selected information for the Western Division of the Hinzel Company for last
year:

Average working capital P625,000


General and administrative expenses 75,000
Net sales 4,000,000
Average plant and equipment 1,775,000
Cost of goods sold 3,525,000

If Hinzel treats the Western Division as an investment center for performance measurement
purposes, what is the before-tax return on investment (ROI) for the year?

3. Dy Company reported these data at year-end:

Pre-tax operating income P4,000,000


Current assets 4,000,000
Long-term assets 16,000,000
Current liabilities 2,000,000
Long-term liabilities 5,000,000

The long-term debt has an interest rate of 8%, and its fair value equated its book value at year-end.
The fair value of the equity capital is P2 million greater than its book value. The company’s income
tax rate is 25% and its cost of equity capital is 10%.

Required: compute –
a) The weighted average of cost of capital (WACC) to be used in the economic value added (EVA)
calculation;
b) EVA

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