The following data pertain to Turk Company's operations last year: If the residual income for the year was $9,000, the minimum required rate of return must have been:
A) 15%
B) 4%
C) 20%
D) 36%

Question

The following data pertain to Turk Company's operations last year:  If the residual income for the year was $9,000, the minimum required rate of return must have been:
A) 15% 
B) 4% 
C) 20% 
D) 36%

Quizplus · Accepted Answer

Residual income = Net operating income − (Average operating assets × Minimum required rate of return)
$9,000 = $36,000 − ($180,000 × Minimum required rate of return)
$180,000 × Minimum required rate of return = $36,000 − $9,000 = $27,000
$180,000 × Minimum required rate of return = $27,000
Minimum required rate of return = $27,000 ÷ $180,000 = 15%

The Following Data Pertain to Turk Company's Operations Last Year