Assume that Division X has generated sales revenue of $3,025,000 and achieved income from operations of $242,000 using $1,800,000 of invested assets.If management desires a minimum rate of return of 12%,the residual income is
A)$26,000.
B)$29,040.
C)$147,000.
D)$186,960.

Question

Quizplus · Accepted Answer

Residual income is calculated as the income from operations minus the product of the minimum rate of return and the invested assets. Here, it is $242,000 - (12% of $1,800,000) = $242,000 - $216,000 = $26,000.

Assume That Division X Has Generated Sales Revenue of $3,025,000