Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The residual income for Mason is:
A) $0
B) $84,150
C) ($6,000)
D) $1,500

Question

Quizplus · Accepted Answer

Residual income is calculated as the income from operations minus the product of the invested assets and the desired minimum rate of return. Here, $99,000 - ($650,000 * 0.15) = $1,500.

Mason Corporation Had $650,000 in Invested Assets, Sales of $700,000