If divisional income from operations is $100,000, invested assets are $850,000, and the minimum rate of return on invested assets is 8%, the residual income is $68,000.

Question

Quizplus · Accepted Answer

The residual income can be calculated as: 
Residual Income = Divisional Income from operations - (Invested assets x Minimum rate of return on invested assets)
Residual Income = $100,000 - ($850,000 x 0.08)
Residual Income = $100,000 - $68,000
Residual Income = $32,000

Therefore, the given statement is false.

If Divisional Income from Operations Is $100,000, Invested Assets Are