Question
Residual Income Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year's results: Adams Division Jefferson
Residual Income
Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year's results:
| Adams Division | Jefferson Division | |||
| Net (after-tax) income | $ 605,000 | $ 315,000 | ||
| Total capital employed | 4,000,000 | 3,250,000 |
In addition, Washington Company's top management has set a minimum acceptable rate of return equal to 8%.
Required:
1. Calculate the residual income for the Adams Division. $
2. Calculate the residual income for the Jefferson Division. $
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Cornerstones of Financial and Managerial Accounting
Authors: Rich Jones, Mowen, Hansen, Heitger
1st Edition
9780538751292, 324787359, 538751290, 978-0324787351
