Reference: 12-04
Estes Company Has Assembled the Following Data for Its

question 48

Multiple Choice

Reference: 12-04
Estes Company has assembled the following data for its divisions for the past year: $$\begin{array} { | l | l | l | } \hline & \text { Division A } & \text { Division B } \\\hline \text { Average operating assets } & \$ 500,000 & ? \\\hline \text { Sales } & ? & \$ 520,000 \\\hline \text { Net operating income } & \$ 100,000 & \$ 20,300 \\\hline \text { Turnover } & 1.25 & 4 \\\hline \text { Margin } & ? & 3.9 \% \\\hline \text { Minimum required rate of return } & 14 \% & ? \\\hline \text { Residual income } & ? & \$ 6,000 \\\hline\end{array}$$
-Division A's residual income is?

• A)$35,000.
• B)$45,000.
• C)$20,000.
• D)$30,000.

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Definitions:

Goodwill

An intangible asset representing the excess value of a purchased company over the fair market value of its identifiable tangible and intangible assets.

Consideration Transferred

The total value of all assets, liabilities, and equity interests given to acquire control of an entity.

Consolidated Revenues

The total revenue generated by a corporation and its subsidiaries, reported as one amount in the consolidated financial statements.