What is Residual income for Galaxy Company if operating income for the period is $125,000, average...

Question

Question

business accounting

Answer 1

Answer #1

Answer: Given information in the question :-

Average operating assets $ 550,000

Minimum rate of return 18%

Operating income $ 125,000

Residual income ?

Computation of Residual Income of Galaxy company

Average operating assets = $ 550,000

Minimum rate of return @ 18%

Minimum required Income ($ 550,000 x 18%) = $ 99,000

Operating Income = $ 125,000

Residual Income = ($ 125,000 - $ 99,000) = $ 26,000

Therefore, Option C $ 26,000 is correct

Answer 2

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