Sun,Inc.has average total assets of $300,000.The annual operating income of the company is $200,000.The target rate of return for the company is 15%.Calculate the residual income.
A) $45,000
B) $100,000
C) $30,000
D) $155,000

Question

Quizplus · Accepted Answer

D) RI = Operating income - Minimum acceptable operating income
 11ea8870_363e_a016_bb89_196f5832e555_TB5025_00 Minimum acceptable operating income = Target rate of return × Average total assets
Minimum acceptable operating income = 15% × $300,000 = $45,000

Sun,IncHas Average Total Assets of $300,000