Question

Dartford Company reported the following financial data for one of its divisions for the year; average investment center total assets of $3,700,000; investment center income $640,000; a target income of 12% of average invested assets. The residual income for the division is:

Answer 1

$196,000

Step-by-step explanation:

Investment income= $6,700,000

Operating assets = $340,000

Rate of return = 12%

Residual income = [$640,000 - ($3,700,000*12%)}

Residual income = $640,000 - $444,000

Residual income = $196,000