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