The Auto Division of Big Department Store had a net income of $560,000,a net asset base of $4,000,000,and a required rate of return of 12 percent.Sales for the period totalled $3,000,000.What is the residual income for the period?
A)$80,000
B)$120,000
C)$360,000
D)$480,000

Question

Quizplus · Accepted Answer

Residual income is calculated as the net income minus the product of the required rate of return and the net asset base. Here, it's $560,000 - (12% of $4,000,000) = $560,000 - $480,000 = $80,000.

The Auto Division of Big Department Store Had a Net