Entrepreneurship is: A. managing businesses for others.B. a controlling interest in the ownership of a corporation.C. managing b
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Answer:
ROI 15%
Residual Income $1,350,000
Explanation:
Residual Income is the difference between net income of the company and the required rate of return. It determines the excess of income generate than the minimum return. The formula to calculate the residual income is,
RI = Net operating Income - (Required rate of return * Cost of operating assets)
RI = $4,500,000 - (21% * $15,000,000 )
RI = $1,350,000
ROI =
Capital Employed = Sales - Average operating assets
ROI = 15%
Residual income is positive when the department has meet the minimum return requirement. Minimum return is the return that is required by the company stakeholders. The particular projects and activities are selected on the basis of residual income.
<u>Solution and Explanation:</u>
1 Amount of depletion, impairment and amortization for the current year
A Cost of timber rights on a tract of land $3,461,120
Estimated stand of timber 5,408,000
Cost of depletion per board feet (3461120 divided by 5408000) $0.64
Current year depletion charges for 1,028,300 board feet $658,112
B Impairment loss $3,640,000
C Cost of Patent $6,108,000
Estimated economic life 10 years
Amortization period 3/4
Amortization $458,100
2 <u>Adjusting entries </u>
Account Titles Debit Credit
a Depletion expense $658,112
Accumulated depletion $658,112
b Loss from Impaired Goodwill $3,640,000
Goodwill $3,640,000
c Amortization expense-Patents $458,100
Patents $458,100