Question

if+net+operating+income+is+$27,000,+average+operating+assets+are+$243,000,+and+the+minimum+required+rate+of+return+is+10%,+what+is+the+residual+income?

Answer 1

Step-by-step explanation:

To calculate the residual income, first, find the required income by multiplying the average operating assets by the minimum required rate of return:

$243,000 * 10% = $24,300

Next, subtract the required income from the net operating income:

$27,000 - $24,300 = $2,700

The residual income is $2,700.