Reference no: EM132535858

Financial data for Guyer Corporation, for last year follow:

Guyer Corporation

Balance Sheet                        Beginning Balance                    Ending Balance

Assets

Cash                                             $140,000                              $120,000

Accounts receivable                            450,000                              530,000

Inventory                                           320,000                                  380,000

Plant and equipment, net                         680,000                                  620,000

Investment in ABC, Inc.                            250,000                                   280,000

Land (undeveloped)                                   180,000                                  170,000

Total assets                                             $2,020,000                                $2,100,000

Liabilities and Stockholders' EquityAccounts payable  $360,000                             $310,000

Long-term debt                                           1,500,000                                     1,500,000

Stockholders' equity                                      160,000                                         290,000

Total liabilities and stockholders' equity               $2,020,000                              $2,100,000

Guyer Corporation

Income Statement Sales $4,050,000

Operating expenses 3,640,000

Net operating income 410,000

Interest and taxes: Interest expense$150,000

Tax expense 110,000 260,000

Net income $150,000

• The company paid dividends of $15,000 last year. The "Investment in ABC, Inc." on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 7%.

Question 1: What was the company's residual income last year?

Multiple Choice

Option 1: $3,000

Option 2: $263,000

Option 3: $296,600

Option 4: $36,600