Assume that Division Blue has achieved a yearly income from operations of $110,000 using $900,000 of invested assets. If management has set a minimum acceptable return of 11%, the residual income is
A) $99,000
B) $691,000
C) $209,000
D) $11,000

Question

Quizplus · Accepted Answer

The residual income is calculated by subtracting the product of the minimum acceptable return rate and the invested assets from the income from operations. Here, it's $110,000 - ($900,000 * 11%) = $110,000 - $99,000 = $11,000.

Assume That Division Blue Has Achieved a Yearly Income from Operations