All categories

3 years ago

Calculating Residual Income

Business

1 answer:

olga_2 [115]3 years ago

3 0

Answer:

1) $2,500,000

2) $425,000

Explanation:

The Average Operating Assets is given using the formula

= (Beginning Operating Assets + Ending Operating Assets) ÷ 2

on substituting the values from the question, we get

⇒ Average Operating Assets = (2,700,000 + 2,300,000) ÷ 2

⇒ Average Operating Assets = 5,000,000 ÷ 2

⇒ Average Operating Assets = $2,500,000

The Residual Income is calculated as:

= Operating Income - (Minimum Rate of Return × Average Operating Assets)

on substituting the values from the question, we get

⇒ Residual Income = $800,000 – (15% × $2,500,000)

⇒ Residual Income = $800,000 - $375,000

⇒ Residual Income = $425,000

You might be interested in

A stock with a beta equal to −1.0 has zero systematic (or market) risk. <br> a. True <br> b. False

Advocard [28]

The statement above is FALSE.
A stock with a beta equal to -1 does not have zero systematic risk.
Systematic risk refers to the uncertainty that is inherent to the entire stock market segment; it is made up majorly of the daily fluctuations in the price of stocks. Beta is the measure of the systematic risk of a stock in comparison to the market as a whole. Beta is also used to compare a stock market risk to that of other stocks.
A stock with a beta value of -1 indicates that the stock price will be less volatile than the market. A stock with a beta value of 1 indicates that the stock price will move with the market.

8 0

3 years ago

Which one of these statements about the service portfolio is correct?

likoan [24]

<span>Service portfolio management should be responsible for monitoring the performance of the services according to the service level agreements. 2. Service portfolio management should be responsible for evaluating the value of the services ...</span>

3 0

3 years ago

If government spending increases or personal income taxes decrease, what are the likely effects on output, price level, and inte

Mila [183]

When there is an increase in government spending, there will be an increase on the output, price level, and interest rates

<h3>What is a government spending?</h3>

This refers to the funds injected to the public sector on the acquisition of services such as education, healthcare, social protection, defense etc.

Most time, the effect of an an increase in government spending leads to an increase on the output, price level, and interest rates as it is a method of stimulate demand.

Therefore, the Option A is correct.

Read more about government spending

<em>brainly.com/question/25125137</em>

#SPJ1

7 0

2 years ago

The following information applies to the questions displayed below) Serendipity Sound, Inc., manufactures and sells compact disc

OlgaM077 [116]

Answer:

$25.50
90,000 units
140,000 units

Explanation:

1. Current contribution margin ratio

= (Selling price - Variable cost)/ Selling price

= (25 - 19.8) / 25

= 0.208

New Direct labor = 5.0 * ( 1 + 8%)

= $5.40

New variable cost = 19.8 + 0.4 = $20.20

To maintain 0.208

0.208 = (Selling price - 20.20) / Selling price

0.208 * Price = Price - 20.20

0.208Price - Price = -20.20

-0.792Price = -20.20

Price = -20.20/-0.792

Price = $25.50

2. Breakeven = Fixed Cost / Contribution Margin

Contribution Margin = Selling price - Variable cost

= 25 - 19.8

= $5.20

= 468,000/5.2

= 90,000 units

3. To earn $260,000;

= (Fixed Cost + 260,000) / Contribution margin

= (468,000 + 260,000) /5.2

= 140,000 units

6 0

3 years ago

Momentous Occasions is a photography business that shoots videos at college parties. The freshman class pays $1,000 in advance

Viefleur [7K]

Answer:

a. Considering the $1,000 paid by the freshman class,

Revenue earned on April 2

Did the earnings occur on the same date the cash was received No

b. Considering the $4,100 paid by the sophomore class,

Revenue earned on April 2

Did the earnings occur on the same date the cash was received No

Explanation:

a. Considering the $1,000 paid by the freshman class, on what date was revenue earned? Did the earnings occur on the same date the cash was received?

Revenue According to IFRS 15 is earned when earnings occur on the same date the cash was received when Momentous Occasions (the entity) transferres goods or services to the customer ( freshman class)

Thus $1,000 paid by the freshman class on March 3 is a Deferred Revenue. Earnings did not occur on the same date the cash was received.

Revenue occured when Momentous Occasions (the entity) transferred goods or services to freashman class on April 2

b. Considering the $4,100 paid by the sophomore class, on what date was the revenue earned? Did the earnings occur on the same date cash received?

Revenue occured when Momentous Occasions (the entity) transferred goods or services to freashman class on April 2

The $4,100 paid by the sophomore class on February 28 is payment for services rendered by Momentous Occasions on party held on April 2.

Thus Earnings did not occur on the same date the cash was received.

5 0

3 years ago