Huntswell Corporation has two major divisions: Agricultural Products and Industrial Products. It provides the following information for the year 2014 Calculate the residual income for the Agriculture division.
A)$5,500
B)$4,400
C)$2,500
D)$1,800

Question

Huntswell Corporation has two major divisions: Agricultural Products and Industrial Products. It provides the following information for the year 2014  Calculate the residual income for the Agriculture division.
A)$5,500 
B)$4,400 
C)$2,500 
D)$1,800

Quizplus · Accepted Answer

Residual income for Agriculture division = Operating income - (Total assets x Minimum required rate of return)
Operating income for Agriculture division = $23,000
Total assets for Agriculture division = $140,000
Minimum required rate of return = 12%
Residual income for Agriculture division = $23,000 - ($140,000 x 12%) = $4,400
Therefore, the correct answer is B) $4,400.

Huntswell Corporation Has Two Major Divisions: Agricultural Products and Industrial