The following information pertains to Robert Company: $$\begin{array} { l r }
\text { Total assets } & \$ 50,000 \
\text { Total current liabilities } & 10,000 \
\text { Total expenses } & 60,000 \
\text { Total liabilities } & 15,000 \
\text { Total revenues } & 80,000
\end{array}$$ If invested capital is defined as total assets minus current liabilities, the residual income at an imputed interest rate of 20% is _____.
A)$12,000
B)$20,000
C)$4,000
D)$2,600

Question

The following information pertains to Robert Company: $$\begin{array} { l r } 
\text { Total assets } & \$ 50,000 \
\text { Total current liabilities } & 10,000 \
\text { Total expenses } & 60,000 \
\text { Total liabilities } & 15,000 \
\text { Total revenues } & 80,000
\end{array}$$ If invested capital is defined as total assets minus current liabilities, the residual income at an imputed interest rate of 20% is _____.
A)$12,000
B)$20,000
C)$4,000
D)$2,600

Quizplus · Accepted Answer

Residual income = Total revenues - (Total expenses + Imputed interest on invested capital)= 80,000 - (60,000 + 0.20 * (50,000 - 10,000))= 80,000 - (60,000 + 8,000)= 80,000 - 68,000= $12,000

The Following Information Pertains to Robert Company If Invested Capital Is Defined as Total Assets Minus Current