10:383 all 100%|Question 4The income statement for Forklift Electrical Ltdfor two years are shown below:Forklift Electrical LtdIncome Statement ComparisonCurrent yearPrior Year(amounts in thousands)$ 33,75021,938$ 11,812$ 24,75016,830$ 7,920SalesCost of goods soldGross profitWages$ 8,775$ 6,188Utilities675250RepairsSellingTotal expenses169325506200$ 10,125$ 6,963Total assets (investment base) $ 4,500$ 1,500Required:a) d) Assuming an 8% cost of capital, calculate theresidual income for each year.e) Would the management of Forklift ElectricalLtd have been more likely to accept theinvestment opportunity if the residual incomehad been used as a performance measureinstead of ROI? Explain your answer.|Unsaved changesSaveB IUAII!!!

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Question 4 The income statement for Forklift Electrical Ltd for two years are shown below: Forklift Electrical Ltd Income Statement Comparison Current year Prior Year (amounts in thousands) $ 33,750 21,938 $ 11,812 $ 24,750 16,830 $ 7,920 Sales Cost of goods sold Gross profit Wages $ 8,775 $ 6,188 Utilities 675 250 325 Repairs Selling Total expenses 169 506 200 $ 10,125 $ 6,963 Total assets (investment base) $ 4,500 $ 1,500 Required: a) d) Assuming an 8% cost of capital, calculate the residual income for each year. e) Would the management of Forklift Electrical Ltd have been more likely to accept the investment opportunity if the residual income had been used as a performance measure instead of ROI? Explain your answer.

Question 4 The income statement for Forklift Electrical Ltd for two years are shown below: Forklift Electrical Ltd Income Statement Comparison Current year Prior Year (amounts in thousands) $ 33,750 21,938 $ 11,812 $ 24,750 16,830 $ 7,920 Sales Cost of goods sold Gross profit Wages $ 8,775 $ 6,188 Utilities 675 250 325 Repairs Selling Total expenses 169 506 200 $ 10,125 $ 6,963 Total assets (investment base) $ 4,500 $ 1,500 Required: a) d) Assuming an 8% cost of capital, calculate the residual income for each year. e) Would the management of Forklift Electrical Ltd have been more likely to accept the investment opportunity if the residual income had been used as a performance measure instead of ROI? Explain your answer.

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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