Redstone Company 00 100,00 ivent 60,00 nvestment in Balsam 60,00 Liabilities and

Question

Redstone Company 00 100,00 ivent 60,00 nvestment in Balsam 60,00 Liabilities and ownmers ong-term deb 00,000 500,00 Total liabilities and owners000 $660.0 Redstone Company ncome Statement $1.222.00 ess in $60,00 0.00 The company paid dividends of $32.200 last year. The Board of Directors of Redstone has set a income last year? (Hint Investment in Balsam Company" and "Land (undeveloped) should be excluded when calculating average operating assets) A. $4.700 B. $28.200 C $31,700 D. $18.800 E. None of the above

Explanation / Answer

Beginning Operating assets = 630000-50000-120000= 460000 Ending Operating assets = 660000-60000-120000= 480000 Average operating assets=(460000+480000)/2= 470000 Residual income = 122200-(470000*25%)= 4700 Option A is correct

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