Answer the Following Questions Using the Information Below:
Carriage Incorporated

question 144

Multiple Choice

Answer the following questions using the information below:
Carriage Incorporated manufactures horse carriages. The company has two divisions, Wheels and Assembly. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for 2015:
$$\begin{array} { | l | r | r | r | r | } \hline & { \text { ASSETS } } && { \text { INCOME } } \\\hline & \text { Book value } & \text { Current value } & \text { Book value } & \text { Current value } \\\hline \text { Wheels } & \$ 485,000 & \$ 550,000 & \$ 120,000 & \$ 140,000 \\\hline \text { Assembly } & \$ 750,000 & \$ 1,200,000 & \$ 160,000 & \$ 172,500 \\\hline\end{array}$$ The company is currently using a 12% required rate of return.
-What are Wheels's and Assembly's residual incomes based on book values,respectively?

• A) $74,000; $28,500
• B) $61,800; $70,000
• C) $63,500; $59.500
• D) $28,500; $74,000

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Definitions:

Sarbanes-Oxley

Legislation aimed at enhancing corporate governance and strengthening the accuracy and reliability of corporate disclosures.

Financial Overhaul

Comprehensive restructuring of the financial regulations and systems to improve their efficiency and stability.