Question

Residual Income The Commercial Division of Galena Company has operating income of $62,240 and assets of $228,000. The minimum acceptable return on assets is 7%. What is the residual income for the division?

Answer 1

Answer:

the residual income for the division is $46280

Explanation:

given data

operating income = $62,240

assets = $228,000

return on assets = 7%

to find out

What is the residual income for the division

solution

we get Residual income for the division that is express as  

Residual Income = Income from operations - ( Minimum required return × Operating Assets)     .......................1

put here value we get

Residual Income = $62,240 - ( 7% × $228,000 )

Residual Income = $62,240 - $15960

Residual Income = $46280

So the residual income for the division is $46280