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 returns on investment and residual incomes:

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

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Invested Assets
Income from Operations
Return on Investment Minimum Return on Investment Minimum Acceptable Income from Operations
Residual Income $780,000 $171,600 (a) 12% (b) (c) $490,000 (d) (e) (f) $58,800 $19,600 $370,000 (g) 14% (h) $40,700 (i) $280,000 $58,800 (j) 12% (k) (l)

Explanation / Answer

a) = $171,600 /$780000

= 22 %

b) $ 171600 * 12%

= $93600

c) Residual income = $171600 - $93600

= $78000

d) = $58,800+ $19600

    = $78400

e) = $ 78400 / 490000

= 16 %

f) = $58800 / $490000

= 12 %

Note - I have solved 6 part rest six part you can solve yourself. It will be practise for you. In case of doubt feel free to get in touch.

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