Sousa Corporation provides the following financial information: $$\begin{array} { | l | r | }
\hline \text { Minimum acceptable operating income } & \$ 560,000 \
\hline \text { Average total assets } & \$ 2,000,000 \
\hline \text { Operating income } & \$ 715,000 \
\hline \text { Return on investment } & 36 \% \
\hline \text { Net sales } & \$ 850,000 \
\hline
\end{array}$$ Calculate the residual income of Sousa Corporation.
A) $1,440,000
B) $290,000
C) $155,000
D) $554,125

Question

Sousa Corporation provides the following financial information: $$\begin{array} { | l | r | } 
\hline \text { Minimum acceptable operating income } & \$ 560,000 \
\hline \text { Average total assets } & \$ 2,000,000 \
\hline \text { Operating income } & \$ 715,000 \
\hline \text { Return on investment } & 36 \% \
\hline \text { Net sales } & \$ 850,000 \
\hline
\end{array}$$ Calculate the residual income of Sousa Corporation.
A) $1,440,000
B) $290,000
C) $155,000
D) $554,125

Quizplus · Accepted Answer

Residual income is calculated as the operating income minus the minimum acceptable operating income. Thus, $715,000 - $560,000 = $155,000.

Sousa Corporation Provides the Following Financial Information Calculate the Residual Income of Sousa Corporation