Residual Income The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $79,800 $420,000 Commercial Division 105,400 620,000 Internet Division 136,800 570,000 Assume that management has established a 12% minimum acceptable return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Income from operations $79,800 $105,400 $136,800 Minimum acceptable income from operations as a percent of invested assets Residual income b. Which division has the most residual income?
Residual Income The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $79,800 $420,000 Commercial Division 105,400 620,000 Internet Division 136,800 570,000 Assume that management has established a 12% minimum acceptable return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Income from operations $79,800 $105,400 $136,800 Minimum acceptable income from operations as a percent of invested assets Residual income b. Which division has the most residual income?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Residual Income
Transcribed Image Text:Residual Income
The income from operations and the amount of invested assets in each division of Beck Industries are as follows:
Income from Operations
Invested Assets
Retail Division
$79,800
$420,000
Commercial Division
105,400
620,000
Internet Division
136,800
570,000
Assume that management has established a 12% minimum acceptable return for invested assets.
a. Determine the residual income for each division.
Retail Division
Commercial Division
Internet Division
Income from operations
$79,800
$105,400
$136,800
Minimum acceptable income from operations as a percent of invested assets
Residual income
b. Which division has the most residual income?
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