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Need help finding the New residual income. Stuart Corporation operates three investment centers. The following financial statements apply to the investment center named Bowman Division.
Need help finding the New residual income.
Stuart 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 Sales revenue $106,080 Cost of goods sold 58,475 Gross margin 47,605 Operating expenses Selling expenses (2,690) Depreciation expense (4,085) Operating income 40, 830 Nonoperating item Loss of sale of land (4,900) Net income $ 35,930 BOWMAN DIVISION Balance Sheet As of December 31, 2018 Assets Cash Accounts receivable Merchandise inventory Equipment less accumulated depreciation Nonoperating assets Total assets Liabilities Accounts payable Notes payable Stockholders' equity $ 12,562 40, 406 37,600 90,318 10,800 $191,686 $ 9,527 71,000 Balance Sheet As of December 31, 2018 Assets Cash Accounts receivable Merchandise inventory Equipment less accumulated depreciation Nonoperating assets Total assets Liabilities Accounts payable Notes payable Stockholders' equity Common stock Retained earnings Total liabilities and stockholder's equity $ 12,562 40, 406 37,600 90,318 10,800 $191,686 $ 9,527 71,000 73,000 38, 159 $191,686 Required c. Calculate the ROI for Bowman. d. Stuart has a desired ROI of 14 percent. Headquarters has $92,000 of funds to assign to its investment centers. The manager of the Bowman Division has an opportunity to invest the funds at an ROI of 16 percent. The other two divisions have investment opportunities that yield only 15 percent. Calculate the new ROI for Bowman division, if the investment opportunity is adopted by Bowman. e. Based on the original data, calculate the original residual income. Also, calculate the new residual income based on information provided in Requirement d. Complete this question by entering your answers in the tabs below. Required Required D Required E Based on the original data, calculate the original residual income. Also, calculate the new residual income based on information provided in Requirement d. (Round your final answer to nearest whole dollar.) $ 15,506 Original residual income New residual incomeStep by Step Solution
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