Care Inc. ,has two divisions that operate independently of one another.The financial data for the year 2015 reported the following results:

The company's desired rate of return is 10%.Income is defined as operating income.
What are the respective residual incomes for the North and South Divisions?
A)$60,000 and $100,000
B)$300,000 and $60,000
C)$300,000 and $100,000
D)$500,000 and $700,000

Question

Care Inc. ,has two divisions that operate independently of one another.The financial data for the year 2015 reported the following results:

The company's desired rate of return is 10%.Income is defined as operating income.
What are the respective residual incomes for the North and South Divisions?
A)$60,000 and $100,000 
B)$300,000 and $60,000 
C)$300,000 and $100,000 
D)$500,000 and $700,000

Quizplus · Accepted Answer

North Division = $1,900,000 - (0.1 × $14,000,000)= $500,000
South Division = $1,800,000 - (0.1 × $11,000,000)= $700,000

Care Inc ,Has Two Divisions That Operate Independently of One Another