Consider the following information for Hiroole Electronics: 12/31/2017 12/31/2018 Total assets $12,1...
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Homework Answers
Residual income = net income - (Average invested assets x required rate of return)
Average invested assets = total assets - non-interest-bearing current liabilities
(1)
for 2017,
average invested assets = $12153000 - $549300 = $11603700
residual income = $766500 - ($11603700 x 10%)
= -$393870
(2)
for 2018,
average invested assets = $11438500 - $581000 = $10857500
residual income = $883820 - ($10857500 x 12%)
= -$419080
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