Compute the Residual Income for the Hi Ho Investment Center

question 49

Multiple Choice

Compute the residual income for the Hi Ho investment center as shown below. $\begin{array}{|l|r|}\hline {\text { Hi Ho Subsidiary }} \\\hline \text { Total sales } & \$ 20,000 \\\text { Operating income } & \$ 4,350 \\\text { Beginning assets invested } & \$ 14,000 \\\text { Ending assets invested } & \$ 16,000 \\\text { Average assets invested } & \$ ? \\\text { Desired ROI } & 25 \% \\\text { Residual income } & \$ ?\\\hline\end{array}$

• A) $600
• B) $3,100
• C) $4,350
• D) $1,850

---

Definitions:

Operating Activities

The day-to-day functions of a business related to producing and delivering its goods and services, as reflected in its cash flow.

Balance Sheet

A financial statement that provides a snapshot of a company's financial condition at a specific time, detailing assets, liabilities, and equity.

Income Statement

A financial report that shows a company's revenues and expenses over a specific period, ultimately revealing the net profit or loss.

Property, Plant

Refers to the long-term assets owned by a company that are used in its operations, including land, buildings, and machinery.