The Following Information Pertains to Garcia Company Invested Capital Is Defined as Total Assets Minus Current Liabilities

question 47

Multiple Choice

The following information pertains to Garcia Company:
$\begin{array}{ll}\text { Total assets } & \$ 50,000 \\\text { Net operating profit after taxes } & \$ 10,000 \\\text { Total current liabilities } & \$ 10,000 \\\text { Total expenses } & \$ 60,000 \\\text { Total liabilities } & \$ 15,000 \\\text { Total revenues } & \$ 80,000\end{array}$
Invested capital is defined as total assets minus current liabilities.The after-tax cost of capital is 20%.What is the residual income?

• A) $2,000
• B) $4,000
• C) $12,000
• D) $20,000

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