Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 15, Problem 14E
Exercise 9-9A Residual income
Climax Corporation has a desired
Required
Compute Mr. Tobin’s residual income.
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Exercise 9-8A
Return on investment
Mitchell Company calculated its return on investment as 13 percent. Sales are now $270,000, and
the amount of total operating assets is $450,000.
Required
a. If expenses are reduced by $27,000 and sales remain unchanged, what return on investment
will result?
b. If both sales and expenses cannot be changed, what change in the amount of operating
assets is required to achieve the same result?
Exercise 9-7A Return on investment
An investment center of Aguilar Corporation shows an operating income of $7,500 on total
operating assets of $60,000.
Required
Compute the return on investment.
Question Content Area Mason Corporation had $
1,020,000 in invested assets, sales of $1,217,000,
operating income amounting to $217,000, and a
desired minimum return on investment of 13 % . The
residual income for Mason Corporation is a. ($5,300) b
$0 c. $84, 400 d. $118, 160
Chapter 15 Solutions
Survey Of Accounting
Ch. 15 - 1. Pam Kelly says she has no faith in budgets. Her...Ch. 15 - 7. What is a responsibility center?Ch. 15 - Prob. 3QCh. 15 - Prob. 4QCh. 15 - Prob. 5QCh. 15 - 3. When are sales and cost variances favorable and...Ch. 15 - 4. Joan Mason, the marketing manager for a large...Ch. 15 - Prob. 8QCh. 15 - Prob. 9QCh. 15 - Prob. 10Q
Ch. 15 - Prob. 11QCh. 15 - 9. Minnie Divers, the manager of the marketing...Ch. 15 - 6. How do responsibility reports promote the...Ch. 15 - Prob. 14QCh. 15 - Prob. 15QCh. 15 - Prob. 16QCh. 15 - 12. How can a residual income approach to...Ch. 15 - Prob. 18QCh. 15 - Exercise 9-6A Evaluating a profit center Helen...Ch. 15 - Prob. 2ECh. 15 - Prob. 3ECh. 15 - Prob. 4ECh. 15 - Exercise 8-3A Determining amount and type...Ch. 15 - Prob. 6ECh. 15 - Exercise 8-4A Determining sales and variable cost...Ch. 15 - Exercise 8-5A Determining flexible budget...Ch. 15 - Exercise 8-9A Responsibility for the fixed cost...Ch. 15 - Prob. 10ECh. 15 - Exercise 8-7A Evaluating a decision to increase...Ch. 15 - Prob. 12ECh. 15 - Prob. 13ECh. 15 - Exercise 9-9A Residual income Climax Corporation...Ch. 15 - Residual income Gletchen Cough Drops operates two...Ch. 15 - Prob. 16ECh. 15 - Prob. 17ECh. 15 - Prob. 18PCh. 15 - Prob. 19PCh. 15 - Prob. 20PCh. 15 - Prob. 21PCh. 15 - Problem 9-20A Return on investment Sorrento...Ch. 15 - Problem 9-21A Comparing return on investment and...Ch. 15 - Comparing return on investment and residual income...Ch. 15 - ATC 8-1 Business Applications Case Static versus...Ch. 15 - Prob. 2ATCCh. 15 - Prob. 3ATCCh. 15 - ATC 9-1 Business Applications Case Analyzing...Ch. 15 - Prob. 5ATC
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- Assume that Division Blue has achieved a yearly income from operations of $157,000 using $956,000 of invested assets. If management has set a minimum acceptable rate of return of 10%, the residual income is a.$157,000 b.$49,120 c.$61,400 d.$73,680arrow_forwardExercise 15-12A (Algo) Return on investment LO 15-6 An investment center of Vernon Corporation shows an operating income of $8,505 on total operating assets of $63,000. Required Compute the return on investment. (Round your answer to 2 decimal places. (i.e., 0.2345 should be entered as 23.45).) Return on investment %arrow_forwardResidual income The Commercial Division of Galena Company has operating income of 12,680,000 and assets of 74,500,000. The minimum acceptable return on assets is 12%. What is the residual income for the division?arrow_forward
- Use the following information for Exercises 11-31 and 11-32: Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last years results: Washingtons actual cost of capital was 12%. Exercise 11-32 Residual Income Refer to the information for Washington Company above. In addition, Washington Companys top management has set a minimum acceptable rate of return equal to 8%. Required: 1. Calculate the residual income for the Adams Division. 2. Calculate the residual income for the Jefferson Division.arrow_forwardQuestion 5: Presented below is selected information for three regional divisions of Medina Company. Divisions North Wets South Contribution Margin $ 300,000 $ 500,000 $ 400,000 Controllable margin $ 150,000 $ 400,000 $ 225,000 Average operating asset $1,000,000 $ 2,000,000 $1,500,000 Minimum rate of return 13% 16% 10% Instructions Compute the return on investment for each Compute the residual income for each Assume that each division has an investment opportunity that would provide a rate of return of 19%. If ROI is used to measure performance, which division or divisions will probably make the additional investment? If residual income is used to measure performance, which division or divisions will probably…arrow_forwardExercise 14-46 (Algo) Compare ROI Using Net Book and Gross Book Values (LO 14-2, 5) The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $40.0 million and having a four-year expected life, after which the assets can be salvaged for $8.0 million. In addition, the division has $40.0 million in assets that are not depreciable. After four years, the division will have $40.0 million available from these non depreciable assets. This means that the division has invested $80 million in assets with a salvage value of $48.0 million. Annual operating cash flows are $12.8 million. In computing ROI, this division uses beginning-of-year asset values in the denominator. Depreciation is computed on a straight-line basis, recognizing the salvage values noted. Ignore taxes. Required: a. & b. Compute ROI, using net book value and gross book value. Note: Enter your answers as a percentage rounded to 2 decimal place (i.e., 32.10). Year 1 Year 2 Year 3…arrow_forward
- Problem 11-2 You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,390,000; rents are estimated at $177,920 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 6 percent interest for 30 years (total annual payments will be monthly payments x 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor's expected before-tax internal rate of return on equity invested…arrow_forwardExerise 11-2 Residual Income Juniper Design Ltd. of Manchester , England , is a company specializing in providing design services to residential developers. Last year the company had net operating income of $600,000 on sales of $3,000,000. The company's average operating assets for the year were $2,800,000 and its minimum required rate of return was 18%. Required : Compute the company's residual income for the year.arrow_forwardQUESTION 26 Top management is trying to determine which would be the best choice of the following investment opportunities: Data of investment choices: 1 Sales $10,000,000 Operating income 200,000 Average operating assets 2,000,000 Required: Compute the Residual Income assuming a minimum required rate of return of 8%. $40,000 $0 $50,000 $(40,000)arrow_forward
- Exercise 14-40 (Algo) Impact of New Asset on Performance Measures (LO 14-2) The Plastics Division of Minock Manufacturing currently earns $2.86 million and has divisional assets of $26 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $5,508,000 and will have a yearly cash flow of $1,469,000. The asset will be depreciated using the straight-line method over a five-year life and is expected to have no salvage value. Divisional performance is measured using ROI with beginning-of-year net book values in the denominator. The company's cost of capital is 7 percent. Ignore taxes. Required: a. What is the divisional ROI before acquisition of the new asset? b. What is the divisional ROI in the first year after acquisition of the new asset? Note: For all requirements, enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1). a. ROI before acquisition b. ROI after acquisition %arrow_forwardBrief Exercise 9-4 (Algo) Calculating return on investment LO 9-4 The following financial information pertains to Smith Architects: Net income Items Beginning assets Ending assets Year 4 $ 241,000 782,000 982,000 a-1. Return on investment Year 3 a-2. Return on investment Year 4 b. The company performed better in Year 3 $ 221,000 706,000 786,000 Required: a. Calculate Smith Architects return on investment for Year 3 and Year 4. Note: Round percentages to 1 decimal place. b. Did the company perform better in Year 3 or Year 4? % %arrow_forwardExercise 15-19 (Algo) Investment center analysis; ROI and residual income LO 15-9 The Northern Division of Allied Incorporated has operating income of $18,500 on sales revenue of $166,000. Divisional operating assets are $80,200, and management of Allied has determined that a minimum return of 13% should be expected from all investments. Required: a. Using the DuPont model, calculate the Northern Division's margin, turnover, and ROI. b. Calculate the Northern Division's residual income. Complete this question by entering your answers in the tabs below. Required A Required B Using the DuPont model, calculate the Northern Division's margin, turnover, and ROI. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Margin Turnover ROI Northern Division % turns %arrow_forward
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