The following data has been provided for Hisjum631 Corporation for the period below:. Return on investment 22 %
Average operating assets $ 40,000
Minimum required rate of return 16 %
What is the residual income for Hisjum631 for the period (closest to)?

$2,400

Explanation:

Calculation for the residual income for Hisjum631 for the period

First step is to calculate the ROI Using this formula

ROI = Net operating income ÷ Average operating assets

Let plug in the formula

0.22 = Net operating income ÷ $40,000

Net operating income = 0.22× $40,000

Net operating income = $8,800

Now let calculate the Residual income using this formula

Residual income = Net operating income − (Average operating assets × Minimum required rate of return)

Let plug in the formula

Residual income= $8,800 − ($40,000 × 0.16)

Residual income= $8,800 − $6,400

Residual income= $2,400

Therefore the residual income for Hisjum631 for the period (closest to) $2,400

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