Assume that Division Blue has achieved a yearly income from operations of $110,000 using $900,000 of invested assets.If management has set a minimum acceptable rate of return of 11%,the residual income is
A) $99,000
B) $691,000
C) $209,000
D) $11,000

Question

Quizplus · Accepted Answer

Residual income is calculated as the actual income minus the product of the minimum acceptable rate of return and the invested assets. Here, it is $110,000 - (11% of $900,000) = $110,000 - $99,000 = $11,000.

Assume That Division Blue Has Achieved a Yearly Income from Operations