The following information pertains to Newhart Company: $$\begin{array} { l l }
\text { Total asset } & \$ 50,000 \
\text { Total current liabilities } & 10,000 \
\text { Total expenses } & 60,000 \
\text { Total liabilities } & 15,000 \
\text { Total revenues } & 80,000
\end{array}$$ If invested capital is defined as total assets minus current liabilities, the residual income at an imputed interest rate of 10% is:
A) $16,000
B) $2,600
C) $20,000
D) $4,000

Question

The following information pertains to Newhart Company: $$\begin{array} { l l } 
\text { Total asset } & \$ 50,000 \
\text { Total current liabilities } & 10,000 \
\text { Total expenses } & 60,000 \
\text { Total liabilities } & 15,000 \
\text { Total revenues } & 80,000
\end{array}$$ If invested capital is defined as total assets minus current liabilities, the residual income at an imputed interest rate of 10% is:
A) $16,000
B) $2,600
C) $20,000
D) $4,000

Quizplus · Accepted Answer

Residual income = Total revenues - Total expenses - (Invested capital * Imputed interest rate)= 80,000 - 60,000 - (40,000 * 0.10)= 80,000 - 60,000 - 4,000= $16,000

The Following Information Pertains to Newhart Company If Invested Capital Is Defined as Total Assets Minus Current