Koogle Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 13%. In August, the Commercial Products Division had average operating assets of $530,000 and net operating income of $76,700. What was the Commercial Products Division's residual income in August?
A)-$9,971
B)-$7,800
C)$7,800
D)$9,971

Question

Quizplus · Accepted Answer

Residual Income = Net Operating Income - (Minimum Required Rate of Return x Average Operating Assets)
Residual Income = $76,700 - (0.13 x $530,000)
Residual Income = $76,700 - $68,900
Residual Income = $7,800
Therefore, the Commercial Products Division's residual income in August was $7,800. Choice C is the correct answer.

Koogle Corporation Uses Residual Income to Evaluate the Performance of Its