If net operating income is $70,000, average operating assets are $250,000, and the minimum required rate of return is 16%, what is the residual income?
A) $11,200
B) $40,000
C) $110,000
D) $30,000

Question

Quizplus · Accepted Answer

Residual income is calculated as net operating income minus (minimum required rate of return multiplied by average operating assets):
Residual income = $70,000 - (0.16 x $250,000) = $30,000 
Therefore, the correct answer is D) $30,000.

If Net Operating Income Is $70,000, Average Operating Assets Are