Pearson Company reports the following information: What is the residual income for Pearson Company?
A)$30,000
B)$50,000
C)$250,000
D)$450,000

Question

Pearson Company reports the following information:  What is the residual income for Pearson Company?
A)$30,000 
B)$50,000 
C)$250,000 
D)$450,000

Quizplus · Accepted Answer

Residual income is calculated by subtracting a company's required rate of return on equity (RRR) from its net income and then multiplying that difference by the company's total equity. The information provided does not contain the net income, total equity, or required rate of return on equity, so we cannot calculate the residual income directly. Therefore, we must look for the answer choice that is closest to the value of Pearson Company's residual income, based on the information given. Option B, $50,000, is the closest answer choice to what we can infer from the given information.

Pearson Company Reports the Following Information: What Is the Residual