Residual Income Washington Company has two divisions: the Adams Division and the Jefferson Division. The following...
Residual Income
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 | $641,300 | $321,300 | ||
| Total capital employed | 4,600,000 | 3,867,500 | ||
In addition, Washington Company's top management has set a minimum acceptable rate of return equal to 11%.
Required:
Enter negative values as negative numbers.
1. Calculate the residual income for the Adams
Division.
$
2. Calculate the residual income for the
Jefferson Division.
$
Homework Answers
1. Residual income for the Adams Division = $641,300 - ($4,600,000 × 0.11) = $135,300
2. Residual income for the Jefferson Division = $321,300 - ($3,867,500 × 0.11) = -$104,125
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Residual Income
Washington Company has two divisions: the Adams Division and the
Jefferson Division. The following...
Residual Income Washington Company has two divisions: the Adams Division and the Jefferson Division. The following...
Residual Income 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 $677,600 $343,350 3,315,000 Total capital employed 4,760,000 In addition, Washington Company's top management has set a minimum acceptable rate of return equal to 9%. Required: Enter negative values as negative numbers. 1. Calculate the residual income for the Adams Division. 2. Calculate the residual income for the Jefferson Division. $
Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains...
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 $611,050 $359,100
Total capital employed 4,720,000 3,672,500
Washington's actual cost of capital was 11%.
Required:
1. Calculate the EVA for the Adams Division. If required, enter
a negative EVA as a negative number by entering your answer with
the minus sign.
$
2. Calculate the EVA for the Jefferson Division. If required,
enter...
Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the following income statement for...
Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the following income statement for the last year: Sales $893,070,000 Less: Variable expenses 546,442,000 Contribution margin $346,628,000 Less: Fixed expenses 198,614,000 Operating income $148,014,000 At the beginning of last year, Elway had $38,632,000 in operating assets. At the end of the year, Elway had 541,363,000 in operating assets. Required: 1. Compute average operating assets. 2. Compute the margin (as a percent) and turnover ratios for last year. If required,...
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Calculating Residual Income Forchen, Inc., provided the following information for two of its divisions for last year: Small Appliances Cleaning Products Division Division Sales $34,610,000 $31,390,000 Operating income 2,637,100 1,252,200 Operating assets, January 1 6,391,000 5,600,000 Operating assets, December 31 7,530,000 6,800,000 Forchen, Inc., requires an 6 percent minimum rate of return. Required: 1. Calculate residual income for the Small Appliances Division. 2. Calculate residual income for the Cleaning Products Division. 3. What if the minimum required rate of return...
Calculating Residual Income Forchen, Inc., provided the following information for two of its divisions for last...
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Residual Income The income from operations and the amount of invested assets in each division of...
Residual Income The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $136,800 $760,000 Commercial Division 128,000 800,000 Internet Division 156,200 710,000 Assume that management has established a 8% minimum acceptable return for invested assets. forn ia Residual Income The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail...
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Residual Income The income from operations and the amount of invested assets in each division of...
Residual Income The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $97,200 $540,000 Commercial Division 67,200 420,000 Internet Division 167,200 760,000 Assume that management has established a 10% minimum acceptable return for inve a. Determine the residual income for each division. Retail Division Commercial Division Internet Division $167,200 $97,200 Income from operations Minimum acceptable income from operations as a percent of invested as...
Residual Income 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 $677,600 $343,350 3,315,000 Total capital employed 4,760,000 In addition, Washington Company's top management has set a minimum acceptable rate of return equal to 9%. Required: Enter negative values as negative numbers. 1. Calculate the residual income for the Adams Division. 2. Calculate the residual income for the Jefferson Division. $
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 $611,050 $359,100
Total capital employed 4,720,000 3,672,500
Washington's actual cost of capital was 11%.
Required:
1. Calculate the EVA for the Adams Division. If required, enter
a negative EVA as a negative number by entering your answer with
the minus sign.
$
2. Calculate the EVA for the Jefferson Division. If required,
enter...
Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the following income statement for the last year: Sales $893,070,000 Less: Variable expenses 546,442,000 Contribution margin $346,628,000 Less: Fixed expenses 198,614,000 Operating income $148,014,000 At the beginning of last year, Elway had $38,632,000 in operating assets. At the end of the year, Elway had 541,363,000 in operating assets. Required: 1. Compute average operating assets. 2. Compute the margin (as a percent) and turnover ratios for last year. If required,...
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
Calculating Residual Income Forchen, Inc., provided the following information for two of its divisions for last year: Sales Operating income Operating assets, January 1 Operating assets, December 31 Small Appliances Cleaning Products Division Division $34,650,000 $31,380,000 2,406,200 1,252,800 6,397,000 5,710,000 7,500,000 6,700,000 Forchen, Inc., requires an 6 percent minimum rate of return. Required: 1. Calculate residual income for the Small Appliances Division. $ 2. Calculate residual income for the Cleaning Products Division. 3. What if the minimum required rate of...
Calculating Residual Income Forchen, Inc., provided the following information for two of its divisions for last year: Small Appliances Cleaning Products Division Division Sales $34,610,000 $31,390,000 Operating income 2,637,100 1,252,200 Operating assets, January 1 6,391,000 5,600,000 Operating assets, December 31 7,530,000 6,800,000 Forchen, Inc., requires an 6 percent minimum rate of return. Required: 1. Calculate residual income for the Small Appliances Division. 2. Calculate residual income for the Cleaning Products Division. 3. What if the minimum required rate of return...
Residual Income The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $136,800 $760,000 Commercial Division 128,000 800,000 Internet Division 156,200 710,000 Assume that management has established a 8% minimum acceptable return for invested assets. forn ia Residual Income The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail...
Residual Income The operating income and the amount of invested assets in each division of Conley Industries are as follows: Operating income Invested Assets Retail Division $77,400 $430,000 630,000 Commercial Division 126,000 Internet Division 173,800 790,000 Assume that management has established a 8% minimum acceptable return for invested assets. a. Determine the residual income for each division Retail Division Commercial Division Internet Division Operating income $77,400 $126,000 $173,800 Minimum acceptable operating income as a percent of invested assets Residual income...
Residual Income The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $97,200 $540,000 Commercial Division 67,200 420,000 Internet Division 167,200 760,000 Assume that management has established a 10% minimum acceptable return for inve a. Determine the residual income for each division. Retail Division Commercial Division Internet Division $167,200 $97,200 Income from operations Minimum acceptable income from operations as a percent of invested as...
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