Which one of the following items would most likely not be incorporated into the calculation of a division's investment base when using the residual income approach for performance measurement and evaluation?
A) Land being held by the division as a potential site for a new plant and parking lot.
B) Division inventories when division management exercises control over the inventory levels.
C) Division accounts payable when division management exercises control over the amount of short-term credit utilized.
D) Division accounts receivable when division management exercises control over credit policy and credit terms.

Question

Quizplus · Accepted Answer

Land held for future use is typically not included in the investment base for residual income calculations, as it is not currently being used in operations to generate income.

Which One of the Following Items Would Most Likely Not