Question
Calculating Residual Income Barnard Manufacturing earned operating income last year as shown in the following income statement: Sales$4,000,000 Cost of goods sold2,100,000 Gross margin$1,900,000 Selling
Calculating Residual Income
Barnard Manufacturing earned operating income last year as shown in the following income statement:
Sales$4,000,000
Cost of goods sold2,100,000
Gross margin$1,900,000
Selling and administrative expense1,100,000
Operating income$800,000
Less: Income taxes (@ 40%). 320,000
Net income$480,000
At the beginning of the year, the value of operating assets was $2,700,000. At the end of the year, the value of operating assets was $2,300,000.
Barnard requires a minimum rate of return of 15%.
Calculate:
1.Average operating assets$
2.Residual income
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