Question

Mason Corporation had $1,103,000 in invested assets, sales of $1,278,000, income from operations amounting to $238,000, and a desired minimum return of 13%. The residual income for Mason Corporation is

Answer 1

Answer:

$94,610

Explanation:

Invested assets (A) = $1,103,000

Sales = $1,278,000

Income from operations (I) = $238,000

minimum rate of return (r) = 13%.

Residual income (RI) is the generated income that exceeds the minimum rate of return and can be defined as:

$RI = I - A*r\\RI = \ 238,000 -\ 1,103,000*0.13\\RI=\ 94,610$

The residual income for Mason Corporation is $94,610