Rooney Inc.had $375,000 in invested assets, sales of $735,000, operating income amounting to $105,000, and a minimum acceptable rate of return of 12% on its invested assets.The residual income for Rooney is:
A) $42,500.
B) $20,500.
C) $60,000.
D) $37,500.

Question

Quizplus · Accepted Answer

Residual income = Operating Income - (Minimum Acceptable Rate of Return x Invested Assets) 
Residual income = $105,000 - (0.12 x $375,000) 
Residual income = $105,000 - $45,000 
Residual income = $60,000