Ask Question
30 July, 02:50

Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year's results: Adams Division Jefferson Division Net (after-tax) income $ 605,000 $ 315,000 Total capital employed 4,000,000 3,250,000 In addition, Washington Company's top management has set a minimum acceptable rate of return equal to 8%. Required: 1. Calculate the residual income for the Adams Division. $ 2. Calculate the residual income for the Jefferson Division

+3
Answers (1)
  1. 30 July, 06:07
    0
    Adams division:

    Net income - 605000

    Minimum acceptable income = [Total capital employed*Rate of return] = 4000000*0.08=320000

    Residual income = NI-Minimum acceptable income=605000-320000=285000

    Jefferson division:

    Net income - 315000

    Minimum acceptable income = [Total capital employed*Rate of return] = 3250000*0.08=260000

    Residual income = NI-Minimum acceptable income = 315000-260000 = 55000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year's ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers