able to reduce its invested capital from $500,000 to $400.000 without affecting Sorrento is operating income. Problem 15-23 Comparing return on investment and residual income LO 15-6, 15-7 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 CHECK FIGURE c. 24.34% Sales revenue Cost of goods sold Gross margin Operating expenses $138,000 78,000 60,000 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 Cash Accounts receivable Merchandise inventory Equipment less accum. dep. Nonoperating assets $18,898 42,266 37,578 90,258 9,000 $198,000 Total assets Liabilities $ 9,637 72,000 Accounts payable Notes payab!e is kholders' equity a non stock 80,000 36,363 earnings and stk. equity $198,000 Required a. Which should be used to determine the rate of return (ROI) for the Bowman investment center, operating income or net income? Explain your answer b. Which should be used to determine the ROI for the Bowman investment center, operating assets or total assets? Explain your answer. c. Calculate the ROI for Bowman. Round the computation to two decimal points. d. Hele ment centers. The manager of the Bowman Division has an opportu of 1 so, the na has a desired ROI of 10 percent. Headquarters has $96,000 of funds to assign to its invest percent. The other two divisions have investment opportunities that yield only 11 percent. Even reject the funds under these circumstances. Round the computation to two decimal points. nity to invest the funds at an ROI 2 manager of Bowman rejects the additional funding. Explain why the manager of Bowman plain how residual income could be used to encourage the manager to accept the additional ound the computation to whole dollars