Which of the Following Statements About Residual Income Is True

question 57

Multiple Choice

Which of the following statements about residual income is true?

• A) Residual income = Operating Income − Sales
• B) Residual income = Operating Income − Operating Assets
• C) Residual income is the amount of income in excess of a target or desired return on investment
• D) None of these answers are correct.

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Definitions:

Interest Revenue

Income earned by a company for lending money or through investments in interest-bearing assets.

Lease Rental Revenue

Income earned by a lessor from leasing out assets to lessees, under the terms specified in lease agreements.

Lease Receivable

An asset account on the balance sheet that represents the amount of rent due to the lessor from the lessee according to the lease agreement.

Sales-Type Lease

An arrangement where a lessor sells an asset to a lessee under lease terms, effectively treating the lease as a purchase and sale from an accounting standpoint.