Brandon, Inc. has provided the following data for last year's operations:

-Brandon's residual income is:
A)$2,000
B)$4,000
C)$3,500
D)$2,500

Question

Brandon, Inc. has provided the following data for last year's operations:

-Brandon's residual income is:
A)$2,000 
B)$4,000 
C)$3,500 
D)$2,500

Quizplus · Accepted Answer

The residual income is calculated by subtracting the minimum required return (in this case 10% of the total invested amount, which is $12,000) from the actual income earned ($14,000). 
Residual income = $14,000 - (10% x $12,000) = $2,000. Therefore, option A is the correct answer.