Dartford Company reported the following financial data for one of its divisions for the year; average investment center total assets of $3,500,000; investment center income $610,000; a target income of 12% of average invested assets. The residual income for the division is:
A) $1,030,000.
B) $190,000.
C) $536,800.
D) $493,200.
E) $683,200.

Question

Quizplus · Accepted Answer

Residual income is calculated as the investment center income minus the target income. The target income is 12% of $3,500,000, which is $420,000. Therefore, the residual income is $610,000 - $420,000 = $190,000.

Dartford Company Reported the Following Financial Data for One of Its