Assume That Divisional Income from Operations Amounts to $192,000 and Top

question 45

Multiple Choice

Assume that divisional income from operations amounts to $192,000 and top management has established 15% as the minimum rate of return on divisional assets totaling $1,000,000. The residual income for the division is:

• A) $42,000
• B) $28,800
• C) $92,000
• D) $0

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Definitions:

Intangible

Assets that lack physical substance but possess value, such as patents, trademarks, and goodwill.

Fair Value

An estimate of the market value of an asset or liability, based on the current price at which an asset could be sold or a liability settled in a fair transaction between willing parties.

Double Declining-Balance

An accelerated depreciation method that doubles the normal depreciation rate, reducing the book value of assets more quickly in the initial years.

Normal Balance

The expected debit or credit balance of an account, indicating its typical financial activity and position in the accounting equation; a different phrasing from the first definition.