Question

1. Determining missing items in return and residual income computations

   Data for Uberto Company are presented in the following table of rates of return on investment and residual incomes:

   Invested Assets		Income from Operations		Return on Investment		Minimum Return		Minimum Acceptable Income from Operations		Residual Income
   $950,000		$228,000		(a)		13%		(b)		(c)
   $460,000		(d)		(e)		(f)		$55,200		$18,400
   $340,000		(g)		14%		(h)		$37,400		(i)
   $260,000		$52,000		(j)		12%		(k)		(l)

   Determine the missing values, identified by the letters above. For all amounts, round to the nearest whole number.

   a.	%
   b.	$
   c.	$
   d.	$
   e.	%
   f.	%
   g.	$
   h.	%
   i.	$
   j.	%
   k.	$
   l.	$

Check My Work

Answer 1

a	24%
b	$                     123,500
c	$                     104,500
d	$                       73,600
e	16%
f	12%
g	$                       47,600
h	11%
i	$                       10,200
j	20%
k	$                       31,200
l	$                       20,800

--Working

Invested Assets	Income from Operations	Return on Investments	Minimum Return	Minimum Acceptable Income from Operations	Residual Income
$                         950,000	$                      228,000	24%	13%	$              123,500	$             104,500
$                         460,000	$                        73,600	16%	12%	$                55,200	$               18,400
$                         340,000	$                        47,600	14%	11%	$                37,400	$               10,200
$                         260,000	$                        52,000	20%	12%	$                31,200	$               20,800

--

Invested Assets	Income from Operations	Return on Investments	Minimum Return	Minimum Acceptable Income from Operations	Residual Income
950000	228000	=228000/950000	0.13	=950000*13%	=228000-123500
460000	=55200+18400	=73600/460000	=55200/460000	55200	18400
340000	=340000*14%	0.14	=37400/340000	37400	=47600-37400
260000	52000	=52000/260000	0.12	=260000*12%	=52000-31200