The Jenkins Division recorded operating data as follows for the past year: For the past year, the minimum required rate of return was:
A)7%
B)8%
C)16%
D)14%

Question

The Jenkins Division recorded operating data as follows for the past year:  For the past year, the minimum required rate of return was:
A)7% 
B)8% 
C)16% 
D)14%

Quizplus · Accepted Answer

Residual income = Net operating income - (Average operating assets × Minimum required rate of return)
$14, 000 = $30, 000 - ($200, 000 × Minimum required rate of return)
$200, 000 × Minimum required rate of return = $30, 000 - $14, 000
$200, 000 × Minimum required rate of return = $16, 000
Minimum required rate of return = $16, 000 ÷ $200, 000 = 8%

The Jenkins Division Recorded Operating Data as Follows for the Past