Waterloo Company earned controllable margin of $125,000 on sales of $1,600,000.The division had average operating assets of $1,300,000.The company requires a return on investment of at least 8%.How much is residual income?

Question

Quizplus · Accepted Answer

Residual income is calculated as controllable margin minus the minimum required return on operating assets. The minimum required return is 8% of $1,300,000, which is $104,000. Therefore, residual income is $125,000 - $104,000 = $21,000.

Waterloo Company Earned Controllable Margin of $125,000 on Sales of $1,600,000.The