Speedy Ltd has an imputed interest rate of 12 per cent. Division Z of Speedy Ltd has invested capital of $800 000 and a return on investment of 15 per cent. What is the residual income?
A) ($24 000)
B) $24 000
C) $96 000
D) None of the given answers

Question

Quizplus · Accepted Answer

Residual Income = Division's Return on Investment - (Capital Invested x Imputed Interest Rate)
Residual Income = 800,000 x 15% - (800,000 x 12%)
Residual Income = $120,000 - $96,000
Residual Income = $24,000

Therefore, the correct answer is B) $24,000.

Speedy Ltd Has an Imputed Interest Rate of 12 Per