Juniper Design Ltd. of Manchester, England, is a company specializing in providi
ID: 2469915 • Letter: J
Question
Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of $410,000 on sales of $2,100,000. The company’s average operating assets for the year were $2,300,000 and its minimum required rate of return was 14%.
Compute the company’s residual income for the year.
Average operating assets:
Net operating income:
Minumum required return:
Residual income:
Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of $410,000 on sales of $2,100,000. The company’s average operating assets for the year were $2,300,000 and its minimum required rate of return was 14%.
Explanation / Answer
Residual income=Net operating income-(Average operating assets*Minumum required return)
=net operating income of $410,000-(average operating assets for the year were $2,300,000*minimum required rate of return was 14%)
=$88,000.
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