question archive The Commercial division of Morse Company has income from operations of $160,000 and assets of $700,000
The Commercial division of Morse Company has income from operations of $160,000 and assets of $700,000
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The Commercial division of Morse Company has income from operations of $160,000 and assets of $700,000. The minimum acceptable rate of return on assets is 9%. What is the residual income for the division?
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Income from operations................................................................... $ 160,000
Less: Minimum acceptable income from operations as a percent
of assets ($700,000 × 9%)............................................................... 63,000
Residual income................................................................................. $ 97,000
