The Following Information Is Available About the Appliance Division of Rainier

question 58

Essay

The following information is available about the Appliance Division of Rainier Company.
Rainier requires a return of 9% from all divisions.
$$\begin{array} { l c } \text { Appliance Division Earnings from Operations } & \$ 18,462,000 \\\text { Appliance Division Sales } & \$ 112,600,000 \\\text { Appliance Division Identifiable Assets } & \$ 173,700,000\end{array}$$
Required:
a. Compute the ROI for the Appliance Division.
b. Compute the residual income for the Appliance Division.

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Definitions:

Gain or Loss

This refers to the financial result that occurs when the selling price of an asset differs from its original purchase price, either higher (gain) or lower (loss).

Bonds

Fixed income investment products that represent loans made by an investor to a borrower, typically corporate or governmental.

Effective Interest Method

A technique used in accounting for amortizing the cost of a bond premium or discount over the life of the bond in a way that results in a constant rate of interest over the period.