Determining missing items in return and residual income computations Data for Ub

Question

Determining missing items in return and residual income computations Data for Uberto Company are presented in the following table of rates of return on investment and residual incomes:

Determine the missing values, identified by the letters above. For all amounts, round to the nearest whole number.

Invested Assets
Income from Operations
Return on Investment Minimum Return Minimum Acceptable Income from Operations
Residual Income $920,000 $239,200 (a) 15% (b) (c) $600,000 (d) (e) (f) $72,000 $24,000 $350,000 (g) 14% (h) $38,500 (i) $260,000 $49,400 (j) 12% (k) (l)

Explanation / Answer

a.Return on Investment

=( $239200/$920000)*100

= 26%

b. Minimum Acceptable Income from Operations

=$920000 x 15%

= $1,38,000

c. Residual Income

= $239200 - $138000

=$1,01,200

d. Income from Operations

= $24000 + $720000

= $96,000

e. Return on Investment

= ($96000/$600000)*100

= 16%

f. Minimum Return

= ($72000/$600000)*100

= 12%

g. Income from Operations

= $350000 x 14%

=$49,000

h. Minimum Return

= ($38500 / 350000 )* 100

= 11%

i. Residual Income

= $49000 - $38500

= $10,500

j. Return on Investment

=($49400/$260000)*100

= 19%

k. Minimum Acceptable Income from Operations

= $260000 x 12%

= $31200

l. Residual Income

=$49400-$31200

= $18,200

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