Return on investment : The Return on Investment is also called ROI. The return means the profit you make as a result of your investments. Return on Investment is a performance measure used to evaluate the profitability or efficiency of an investments or compare the efficiency of a number of investments. ROI is generally defined as the ratio of net profit over the total cost of the investment. ROI is calculated by dividing the net income by the total cost of the investment. Residual income: Residual income means the income or money that continues to flow after an initial investment of time and resources has been completed. It is the net operational income that an investment center generates above the minimum needed return on its operating assets. Residual income is often referred to as a passive income. To compute: The margin, turnover and return on investment for each division.

Question

Want to see the full answer?

Answer 1

Question

Chapter 11, Problem 6E

1

To determine

Concept introduction:

Return on investment:

The Return on Investment is also called ROI. The return means the profit you make as a result of your investments. Return on Investment is a performance measure used to evaluate the profitability or efficiency of an investments or compare the efficiency of a number of investments. ROI is generally defined as the ratio of net profit over the total cost of the investment. ROI is calculated by dividing the net income by the total cost of the investment.

Residual income:

Residual income means the income or money that continues to flow after an initial investment of time and resources has been completed. It is the net operational income that an investment center generates above the minimum needed return on its operating assets. Residual income is often referred to as a passive income.

To compute:

The margin, turnover and return on investment for each division.

2

To determine

Concept introduction:

Return on investment:

The Return on Investment is also called ROI. The return means the profit you make as a result of your investments. Return on Investment is a performance measure used to evaluate the profitability or efficiency of an investments or compare the efficiency of a number of investments. ROI is generally defined as the ratio of net profit over the total cost of the investment. ROI is calculated by dividing the net income by the total cost of the investment.

Residual income:

Residual income means the income or money that continues to flow after an initial investment of time and resources has been completed. It is the net operational income that an investment center generates above the minimum needed return on its operating assets. Residual income is often referred to as a passive income.

To compute:

The residual income for each division.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

test test 123

Need assi

Consolidation after Several Years On January 1, 2016, Adams Corporation acquired all of the stock of Baker Company. The fair value of Adams’ shares used in the exchange was $37,500,000. At the time of acquisition, the book value of Baker’s shareholders’ equity was $5,000,000, and the book value of Baker’s building (25-year life) exceeded its fair value by $1,000,000. From the date of acquisition to December 31, 2021, Baker had cumulative net income of $1,300,000. For 2022, Baker reported net income of $300,000. Adams uses the complete equity method to account for its investment in Baker. There is no goodwill impairment loss for the period 2016 through 2021, but there is impairment loss of $100,000 in 2022. Baker declared no dividends during the period 2016–2022. Required Prepare the working paper eliminating entries necessary to consolidate the financial statements of Adams and Baker at December 31, 2022. Enter numerical answers using all zeros (do not abbreviate in thousands or in…