Homework Answers
ANSWER
Residual income = net income - invested assets x required rate of return
invested assets = Total assets - non-interest-bearing current liabilities
for 2017
invested assets = $12007000 - $567100 = $11439900
residual income = $776800 - $11439900 x 10%
= -$367190
for 2018
invested assets = $12928200 - $516000 = $12412200
residual income = $835660 - $12412200 x 12%
= -$653804
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Problem 12-4 (Part Level Submission) Consider the following information for Speedway Electronics: Total assets Noninterest-bearing current...
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Consider the following information for Hiroole Electronics: 12/31/2017 12/31/2018 Total assets $12,1...
Consider the following information for Hiroole
Electronics:
12/31/2017
12/31/2018
Total assets
$12,153,000
$11,438,500
Noninterest-bearing current liabilities
549,300
581,000
Net income
766,500
883,820
Interest expense
2,320,500
360,340
Tax rate
40%
40%
Required rate of return
10%
12%
(a)
Evaluate the company in terms of residual income (RI), which is
equivalent to EVA since there are no adjustments for accounting
distortions. (Enter negative answers preceding either -
sign, e.g. -45 or in parentheses, e.g. (45).)
2017
2018
Residual income
$
$
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Problem 7-5 (Part Level Submission)
Pina Company has four operating divisions. During the first quarter
of 2017, the company reported aggregate income from operations of
$212,300 and the following divisional results.
Division
I
II
III
IV
Sales
$254,000
$199,000
$501,000
$443,000
Cost of goods sold
204,000
190,000
301,000
247,000
Selling and administrative expenses
69,700
61,000
57,000
55,000
Income (loss) from operations
$ (19,700)
$ (52,000)
$143,000
$141,000
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each division.
I
II...
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Consider the following information for Hiroole
Electronics:
12/31/2017
12/31/2018
Total assets
$12,153,000
$11,438,500
Noninterest-bearing current liabilities
549,300
581,000
Net income
766,500
883,820
Interest expense
2,320,500
360,340
Tax rate
40%
40%
Required rate of return
10%
12%
(a)
Evaluate the company in terms of residual income (RI), which is
equivalent to EVA since there are no adjustments for accounting
distortions. (Enter negative answers preceding either -
sign, e.g. -45 or in parentheses, e.g. (45).)
2017
2018
Residual income
$
$
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Problem 7-5 (Part Level Submission)
Pina Company has four operating divisions. During the first quarter
of 2017, the company reported aggregate income from operations of
$212,300 and the following divisional results.
Division
I
II
III
IV
Sales
$254,000
$199,000
$501,000
$443,000
Cost of goods sold
204,000
190,000
301,000
247,000
Selling and administrative expenses
69,700
61,000
57,000
55,000
Income (loss) from operations
$ (19,700)
$ (52,000)
$143,000
$141,000
Analysis reveals the following percentages of variable costs in
each division.
I
II...
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