Residual Income

The income from operations and the amount of invested assets in each division of Devon Industries are as follows:

	Income from Operations		Invested Assets
Sporting Goods Division	$116,000		580,000
Health Care Division	45,000		250,000
Commercial Division	99,000		660,000

Assume that management has established a 12% minimum acceptable rate of return for invested assets.

a. Determine the residual income for each division.

	Sporting Goods Division			Health Care Division			Commercial Division
Income from operations	$116,000			$45,000			$99,000
Minimum amount of income from operations
Residual income	$			$			$

b. Which division has the most residual income? SelectCommercial DivisionHealth Care DivisionSporting Goods DivisionItem 7