The following information pertains to Baltic Company:

-If invested capital is defined as stockholders' equity, the residual income at an imputed interest rate of 15 percent is
A) $118,000.
B) $160,000.
C) $24,000.
D) $42,000.

Question

The following information pertains to Baltic Company:
 
-If invested capital is defined as stockholders' equity, the residual income at an imputed interest rate of 15 percent is
A) $118,000. 
B) $160,000. 
C) $24,000. 
D) $42,000.

Quizplus · Accepted Answer

To calculate the residual income, we first need to calculate the net income of the company. The given information does not provide us with the net income figure, so we cannot calculate it.

However, we are given that invested capital is defined as stockholders' equity. So, we can use the formula for residual income based on stockholders' equity.

Residual income = Net Income - (Invested Capital x Imputed Interest Rate)

We have the imputed interest rate of 15 percent. Now, we need to calculate the invested capital.

Invested Capital = Stockholders' Equity

Unfortunately, we are not given the figure for stockholders' equity. Hence, we cannot calculate the invested capital.

Therefore, we cannot determine the residual income. As we do not have the requisite information to answer the question, the best choice would be to select none of the given options.

The Following Information Pertains to Baltic Company