Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The residual income for Chicks is:
A) $165,000
B) $302,500
C) $137,500
D) $191,500

Question

Quizplus · Accepted Answer

Residual income = Income from operations - (desired rate of return x invested assets)
Residual income = 302,500 - (0.15 x 1,100,000)
Residual income = $137,500

Therefore, the best choice is C, as it represents the correct calculation for Chicks Corporation's residual income.

Chicks Corporation Had $1,100,000 in Invested Assets, Sales of $1,210,000