Homework Answers
Residual income=Operating income-(Operating assets*Desired rate of return)
=277,000-(2,400,000*8%)
which is equal to
=$85,000
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Exercise 15-14 Residual income LO 15-7 Solomon Corporation has a desired rate of return of 8...
Exercise 15-16 Return on investment and residual income LO 15-6, 15-7 Required Supply the missing information...
Exercise 15-16 Return on investment and residual income LO 15-6, 15-7 Required Supply the missing information in the following table for Perez Company. (Do not round intermediate calculations. Round "ROI" answer to 2 decimal places. (i., .2345 should be entered as 23.45).) 365,400 Sales $ ROI Operating assets Operating income Turnover Residual income 2.1 13 % Operating profit margin Desired rate of return 18 %
Solomon Technologies, Inc. has three divisions. Solomon has a desired rate of return of 12.0 percent....
Solomon Technologies, Inc. has three divisions. Solomon has a desired rate of return of 12.0 percent. The operating assets and income for each division are as follows: Divisions Operating Assets Operating Income Printer $ 680,000 $ 109,480 Copier 950,000 100,700 Fax 500,000 67,500 Total $ 2,130,000 $ 277,680 Solomon headquarters has $134,000 of additional cash to invest in one of its divisions. The division managers have identified investment opportunities that are expected to yield the following ROIs: Expected ROIs...
Solomon Company has operating assets of $19,000,000. The company's operating income for the most recent accounting...
Solomon Company has operating assets of $19,000,000. The company's operating income for the most recent accounting period was $2,620,000. The Dannica Division of Solomon controls $8,170,000 of the company's assets and earned $1,240,000 of its operating income. Solomon's desired ROI is 9 percent. Solomon has $1,120,000 of additional funds to invest. The manager of the Dannica division believes that his division could earn $143,000 on the additional funds. The highest investment opportunity to any of the company's other divisions is...
Exercise 15-15 Residual income LO 15-7 Adams Cough Drops operates two divisions. The following information pertains to...
Exercise 15-15 Residual income LO 15-7 Adams Cough Drops operates two divisions. The following information pertains to each division for 2018: Sales Operating income Average operating assets Company's desired rate of return Division A $ 212,000 $ 15,700 $ 63,000 17% Division B $79,000 $ 9,400 $42,000 17% Required a. Compute each division's residual income. b. Which division increased the company's profitability more? Residual Income a. Division A Division B b. The division that increased the company's profitability more is
Exercise 15-17 Comparing return on investment with residual income LO 15-6, 15-7 The Monarch Division of...
Exercise 15-17 Comparing return on investment with residual income LO 15-6, 15-7 The Monarch Division of Allgood Corporation has a current ROI of 11 percent. The company target ROI is 7 percent. The Monarch Division has an opportunity to invest $4,900,000 at 9 percent but is reluctant to do so because its ROI will fall to 10.30 percent. The present investment base for the division is $9,100,000. Required a. Calculate the current residual income and the residual income with the...
the monarch division Exercise 15-17 Comparing return on investment with residual income LO 15-6, 15-7 The...
the monarch division
Exercise 15-17 Comparing return on investment with residual income LO 15-6, 15-7 The Monarch Division of Allgood Corporation has a current ROI of 13 percent. The company target ROI is 9 percent. The Monarch Division has an opportunity to invest $5,600,000 at 11 percent but is reluctant to do so because its ROI will fall to 12 20 percent. The present investment base for the division is $8.400,000. Required a. Calculate the current residual income and the...
Problem 15-23 Comparing return on investment and residual income Helena Corporation operates three investment centers. The...
Problem 15-23 Comparing return on investment and residual income Helena Corporation operates three investment centers. The following financial statements apply to the investment center named Bowman Division. BOWMAN DIVISION Income Statement For the Year Ended December 31,2018 138,000 78,000 60,000 Sales revenue Cost of goods sold Gross margin Operating expenses Selling expenses Depreciation expense (6,000) 8.000) 46,000 Operating income Nonoperating item Loss on sale of land Net income (16,000) 30,000 BOWMAN DIVISION Balance Sheet As of December 31, 2018 Assets...
18 Solomon Corporation operates three Investment centers. The following financial statements apply to the investment center...
18 Solomon Corporation operates three Investment centers. The following financial statements apply to the investment center named Bowman Division BORCUN DIVISION Income Statement Tor the Year Ended December 31, 2018 Sales revenue $107,280 Cost of goods sold 58, 775 Gross margin 48,505 Operating expenses Selling expenses (2,780) Depreciation (4,135) expense Operating income 41,590 Nonoperating item Loss of sale of (4,000) Net Income $ 37.590 BOWMAN DIVISION Balance Sheet As of December 31, 2018 Assets Cash $ 12,582 Accounts receivable 40,...
Return on Investment and Residual income Johnson Company has two sources of funds: long-term debt and...
Return on Investment and Residual income Johnson Company has two sources of funds: long-term debt and equity capital. Johnson Company has profit centers in the following locations with the following net incomes and total assets: Las Vegas 5710,000 $4,000,000 950,000 3.000.000 1,790,000 12,000,000 Tampa a. Calculate ROI for each profit center and rank them from highest to lowest based on ROL Round Rol to the nearest whole percentage SVS Dallas b. Calculate residual income for each profit center based on...
Exercise 9-12A Comparing return on investment with residual income LO 9-2, 9-3 The Monarch Division of...
Exercise 9-12A Comparing return on investment with residual income LO 9-2, 9-3 The Monarch Division of Allgood Corporation has a current ROI of 11 percent. The company target ROI is 7 percent. The Monarch Division has an opportunity to invest $4,500,000 at 9 percent but is reluctant to do so because its ROI will fall to 10.25 percent. The present investment base for the division is $7,500,000. Required a. Calculate the current residual income and the residual income with the...
Exercise 15-16 Return on investment and residual income LO 15-6, 15-7 Required Supply the missing information in the following table for Perez Company. (Do not round intermediate calculations. Round "ROI" answer to 2 decimal places. (i., .2345 should be entered as 23.45).) 365,400 Sales $ ROI Operating assets Operating income Turnover Residual income 2.1 13 % Operating profit margin Desired rate of return 18 %
Solomon Company has operating assets of $19,000,000. The company's operating income for the most recent accounting period was $2,620,000. The Dannica Division of Solomon controls $8,170,000 of the company's assets and earned $1,240,000 of its operating income. Solomon's desired ROI is 9 percent. Solomon has $1,120,000 of additional funds to invest. The manager of the Dannica division believes that his division could earn $143,000 on the additional funds. The highest investment opportunity to any of the company's other divisions is...
Exercise 15-15 Residual income LO 15-7 Adams Cough Drops operates two divisions. The following information pertains to each division for 2018: Sales Operating income Average operating assets Company's desired rate of return Division A $ 212,000 $ 15,700 $ 63,000 17% Division B $79,000 $ 9,400 $42,000 17% Required a. Compute each division's residual income. b. Which division increased the company's profitability more? Residual Income a. Division A Division B b. The division that increased the company's profitability more is
Exercise 15-17 Comparing return on investment with residual income LO 15-6, 15-7 The Monarch Division of Allgood Corporation has a current ROI of 11 percent. The company target ROI is 7 percent. The Monarch Division has an opportunity to invest $4,900,000 at 9 percent but is reluctant to do so because its ROI will fall to 10.30 percent. The present investment base for the division is $9,100,000. Required a. Calculate the current residual income and the residual income with the...
the monarch division
Exercise 15-17 Comparing return on investment with residual income LO 15-6, 15-7 The Monarch Division of Allgood Corporation has a current ROI of 13 percent. The company target ROI is 9 percent. The Monarch Division has an opportunity to invest $5,600,000 at 11 percent but is reluctant to do so because its ROI will fall to 12 20 percent. The present investment base for the division is $8.400,000. Required a. Calculate the current residual income and the...
Problem 15-23 Comparing return on investment and residual income Helena Corporation operates three investment centers. The following financial statements apply to the investment center named Bowman Division. BOWMAN DIVISION Income Statement For the Year Ended December 31,2018 138,000 78,000 60,000 Sales revenue Cost of goods sold Gross margin Operating expenses Selling expenses Depreciation expense (6,000) 8.000) 46,000 Operating income Nonoperating item Loss on sale of land Net income (16,000) 30,000 BOWMAN DIVISION Balance Sheet As of December 31, 2018 Assets...
18 Solomon Corporation operates three Investment centers. The following financial statements apply to the investment center named Bowman Division BORCUN DIVISION Income Statement Tor the Year Ended December 31, 2018 Sales revenue $107,280 Cost of goods sold 58, 775 Gross margin 48,505 Operating expenses Selling expenses (2,780) Depreciation (4,135) expense Operating income 41,590 Nonoperating item Loss of sale of (4,000) Net Income $ 37.590 BOWMAN DIVISION Balance Sheet As of December 31, 2018 Assets Cash $ 12,582 Accounts receivable 40,...
Return on Investment and Residual income Johnson Company has two sources of funds: long-term debt and equity capital. Johnson Company has profit centers in the following locations with the following net incomes and total assets: Las Vegas 5710,000 $4,000,000 950,000 3.000.000 1,790,000 12,000,000 Tampa a. Calculate ROI for each profit center and rank them from highest to lowest based on ROL Round Rol to the nearest whole percentage SVS Dallas b. Calculate residual income for each profit center based on...
Exercise 9-12A Comparing return on investment with residual income LO 9-2, 9-3 The Monarch Division of Allgood Corporation has a current ROI of 11 percent. The company target ROI is 7 percent. The Monarch Division has an opportunity to invest $4,500,000 at 9 percent but is reluctant to do so because its ROI will fall to 10.25 percent. The present investment base for the division is $7,500,000. Required a. Calculate the current residual income and the residual income with the...
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