The Following Information Is Available for Applegate Company Invested Capital Is Defined as Total Assets Less Current Liabilities

question 106

Multiple Choice

The following information is available for Applegate Company:
$\begin{array}{llll}\text { Current assets } & \$ 100,000 & \text { Current liabilities } & \$ 175,000 \\\text { Property, plant and } & & \text { Long-term liabilities } & 100,000 \\\text { equipment } & 150,000 & \text { Stockholders'equity } & \underline{25,000}\\\text { Other assets } & {50,000}&\text { Total liabilities and }\\\text { Total assets } & \$ 300,000&\text { stockholders'equity }&\$ 300,000\end{array}$
Invested capital is defined as total assets less current liabilities.The after-tax operating income is $150,000.The after-tax cost of capital is 20%.The before-tax operating income is $200,000.What is the residual income?

• A) $90,000
• B) $120,000
• C) $125,000
• D) $175,000

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Definitions:

Agricultural Subsidies

Financial aids and support provided by government agencies to farmers and agribusinesses to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities.

Food, Conservation, And Energy Act

A piece of legislation aimed at governing various aspects of food, agriculture, and energy resource management; also known as the Farm Bill.

Smooth Income

The practice or process of stabilizing income over time in order to manage fluctuations and avoid significant variations in earning levels.

Parity

A concept of economic equality or equivalence, such as between currencies or in the income levels between groups.