Black Sea Company has two divisions, the Old Division and the New Division. Last year, the Old Division earned operating income of $66,000 using average operating assets of $550,000. Last year, the New Division earned $260,000 of operating income using average operating assets of $2,000,000. Minimum required rate of return for Black Sea is 9%.
Required:
A. For the Old Division, residual income is __________________.
B. For the New Division, residual income is __________________.
Now assume that the minimum required rate of return for Black Sea is 12%.
C. For the Old Division, residual income is __________________.
D. For the New Division, residual income is __________________.

Question

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The Answer of Black Sea Company has two divisions, the Old Division and the New Division. Last year, the Old Division earned operating income of $66,000 using average operating assets of $550,000. Last year, the New Division earned $260,000 of operating income using average operating assets of $2,000,000. Minimum required rate of return for Black Sea is 9%.
Required:
A. For the Old Division, residual income is __________________.
B. For the New Division, residual income is __________________.
Now assume that the minimum required rate of return for Black Sea is 12%.
C. For the Old Division, residual income is __________________.
D. For the New Division, residual income is __________________.

Black Sea Company Has Two Divisions, the Old Division and the New