East Mullett Manufacturing earned operating income last year as shown in the following income statement:

Sales ................................................................$3,750,000
Cost of goods sold........................................... 2,250,000
Gross margin.................................................. $1,500,000
Selling and administrative expense.............. 1,200,000
Operating income............................................ $ 300,000
Less: Income taxes.............................. (@ 40%) 120,000
Net income....................................................... $ 180,000

At the beginning of the year, the value of operating assets was $1,600,000. At the end of the year, the value of operating assets was $1,400,000. East Mullett requires a minimum rate of return of 5%.

Required:
Calculate 

(1) Average operating assets 

(2) Residual income.