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Company X has two investment centres. Masum is the manager of investment centre 1 and Langley is the manager of investment centre 2. The following
Company X has two investment centres. Masum is the manager of investment centre 1 and Langley is the manager of investment centre 2. The following information relate to the two investment centres. Investment centre 1 Investment centre 2 Profit $202 000 $1 750 000 Invested capital $345 000 $2 000 000 Imputed interest rate 8% 10% Requked: 1. Calculate residual income for the two investment centres. (2 marks) 2. Residual income only will be used to evaluate the performance of the two centres. Do you think this is a good idea? Explain. (2 marks) 3. Langley was very excited that Company X made a huge profit this year and shared this information with his sister. The financial statements will still take another two weeks before it is released to the public. State whether Langley has broken any of the fundamental code of ethics and specify which one(s). (1 mark)
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