Question
Division P has the following statement of financial position at the end of the recent year financial year. Particular RM 000 Non-current assets 5,460 Current
Division P has the following statement of financial position at the end of the recent year financial year.
Particular RM 000 Non-current assets 5,460 Current assets 630 Share capital & reserves * 4,035 Long term debts 150 Current liabilities 555 *. Include retained profit for the year of RM480,000 after deducting dividend paid to common shareholders of RM300,000, Interest on long term debts RM150,000 and Taxation amounting RM105,000. Required; Calculate, a) Return on investment (ROI) for the year b) Residual income for the year.
Division G is considering purchasing a new machine costing RM750,000 and is expected to generate cost savings of RM250,000 a year. The asset is expected to have a useful life of five years with no residual value. The depreciation is to be charged at the straight-line method cost. The divisional performance is evaluated based on its residual income. The division cost of capital is 10.0% per annum. Required; Calculate for 3 years the machines a) Residual income (RI) b) Return on investment (ROI)
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