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Calculating Residual Income Pelican Manufacturing earned operating income last year as shown in the following income statement: Sales $531,250 Cost of goods sold 280,000 Gross
Calculating Residual Income
Pelican Manufacturing earned operating income last year as shown in the following income statement:
Sales | $531,250 |
Cost of goods sold | 280,000 |
Gross margin | $251,250 |
Selling and administrative expense | 185,800 |
Operating income | $65,450 |
Less: Income taxes (@ 40%) | 26,180 |
Net income | $39,270 |
At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000. Pelican requires a minimum rate of return of 10%.
Required:
For Pelican, calculate:
1. Average operating assets | $fill in the blank 1 |
2. Residual income | $fill in the blank 2 |
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