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East Mullett Manufacturing earned operating income last year as shown in the following income statement: Sales $531,250 280,000 Cost of goods sold Gross margin $251,250 Selling and administrative expense Operating income Less: Income taxes (@40%) 186,100 $65,150 26,060 $39,090 At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000. East Mullett requires a minimum rate of return o Required: Net income

East Mullett Manufacturing earned operating income last year as shown in the following income statement: Sales $531,250 280,000 Cost of goods sold Gross margin $251,250 Selling and administrative expense Operating income Less: Income taxes (@40%) 186,100 $65,150 26,060 $39,090 At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000. East Mullett requires a minimum rate of return o Required: Net income

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Calculating Residual Income East Mullett Manufacturing earned operating income last year as shown in the following income statement: $531,250 280,000 $251,250 186,100 $65,150 26,060 Sales Cost of goods sold Gross margin Selling and administrative expense Operating income Less: Income taxes (@40%) Net income At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000. East Mullett requires a minimum rate of return of 10%. Required: For East Mullett, calculate: 1. Average operating assets $ 2. Residual income $ $39,090
Transcribed Image Text:Calculating Residual Income East Mullett Manufacturing earned operating income last year as shown in the following income statement: $531,250 280,000 $251,250 186,100 $65,150 26,060 Sales Cost of goods sold Gross margin Selling and administrative expense Operating income Less: Income taxes (@40%) Net income At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000. East Mullett requires a minimum rate of return of 10%. Required: For East Mullett, calculate: 1. Average operating assets $ 2. Residual income $ $39,090
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