Answer the following question(s) using the information below:
Carriage Ltd. manufactures baby carriages. The company has two divisions, Wheels and Assembly. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for the year just ended:
The company is currently using a 12% required rate of return.
-What are Wheels's and Assembly's residual incomes based on current values, respectively?
A) $70,000; $28,500
B) $94,000; $28,500
C) $94,000; $70,000
D) $28,500; $94,000
E) $61,800; $70,000

Question

Answer the following question(s) using the information below:
Carriage Ltd. manufactures baby carriages. The company has two divisions, Wheels and Assembly. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for the year just ended:
  The company is currently using a 12% required rate of return.
-What are Wheels's and Assembly's residual incomes based on current values, respectively?
A) $70,000; $28,500 
B) $94,000; $28,500 
C) $94,000; $70,000 
D) $28,500; $94,000 
E) $61,800; $70,000

Quizplus · Accepted Answer

Current value RI:
Wheels: $160,000 - ($550,000 × 0.12) = $160,000 - $66,000 = $94,000
Assembly: $172,500 - ($1,200,000 × 0.12) = $172,500 - $144,000 = $28,500

Answer the Following Question(s) Using the Information Below