question archive The Consumer Division of McPhie Company has income from operations of $75,000 and assets of $500,000
The Consumer Division of McPhie Company has income from operations of $75,000 and assets of $500,000
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The Consumer Division of McPhie Company has income from operations of $75,000 and assets of $500,000. The minimum acceptable rate of return on assets is 11%. What is the residual income for the division?
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Income from operations.................................................................... $ 75,000
Less: Minimum acceptable income from operations as a percent
of assets ($500,000 × 11%)............................................................... 55,000
Residual income................................................................................. $ 20,000
