Question

Dartford Company reported the following financial data for one of its divisions for the year; average investment center total assets of $5,100,000; investment center income $850,000; a target income of 12% of average invested assets. The residual income for the division is:

Answer 1

Answer:

$238,000

Explanation:

Datford company reported the following financial data

Total assessment of $5,100,000

Investment center income of $850,000

Target income of 12%

Therefore the residual income for this division can be calculated as follows

= $5,100,000 × 12/100

= $5,100,000 × 0.12

= $612,000

$850,000-$612,000

= $238,000

Hence the residual income is $238,000