Richard's Division of Richard and Sons has the following data related to a particular period:
Calculate the amount of residual income for the period.

A) $70 000
B) $7000
C) $77 000
D) $680 000

Question

Richard's Division of Richard and Sons has the following data related to a particular period:  Calculate the amount of residual income for the period.A)  $70 000B)  $7000C)  $77 000D)  $680 000

Mitchell Watson · Accepted Answer

Final Answer : B, Explanation :  Residual income can be calculated as follows:Residual income = Net Operating Income - (Minimum Required Return x Total Assets)From the given data:Net Operating Income = $140,000Minimum Required Return = 10%Total Assets = $1,300,000Therefore,Residual income = $140,000 - (0.10 x $1,300,000) = $70,000Hence, the correct answer is option B.

Richard's Division of Richard and Sons has the following data related to a particular period:
Calculate the amount of residual income for the period.

A) $70 000
B) $7000
C) $77 000
D) $680 000

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