Assume that Division A has generated sales revenue of $4,550,000 and achieved income from operations of $530,000 using $2,800,000 of invested assets.If management desires a minimum rate of return of 15%,the residual income would be:
A)$110,000.
B)$152,500.
C)$79,500.
D)$530,000.

Question

Quizplus · Accepted Answer

Residual income = Income from operations - (Minimum rate of return * Invested assets)= $530,000 - (0.15 * $2,800,000)= $530,000 - $420,000= $110,000

Assume That Division a Has Generated Sales Revenue of $4,550,000