Question

The Auto Division of Big Department Store had a net operating income of $560,000, a net asset base of $4,000,000, and a required rate of return of 12%. Sales for the period totaled $3,000,000. The residual income for the period is: a.$360,000. b.$80,000. c.$120,000. d.$480,000.

Answer 1

b.$80,000

Step-by-step explanation:

The computation of the residual income is given below;

= net operating income - (required rate of return of net asset base)

= 560,000 - (4,000,000×12%)

= $80,000

hence, the residual income is $80,000

Therefore the option b is correct

The same is relevant and considered too