Concept explainers
a.
Return on investment (ROI) is an accounting measure of income divided by an accounting measure of investment. The formula used to determine ROI is given below:
However, ROI can provide more helpful in evaluating the performance when broken into two components as shown below.
Residual income:
Residual income (RI) is an accounting measure of an income minus a dollar amount for required return on accounting measure of investment. The formula used to determine the RI is given below:
To determine: The residual income for D Company.
b.
The economic value added (EAV) for D Company.
Trending nowThis is a popular solution!
Chapter 23 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
- Juniper Design Limited of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of $400,000 on sales of $1,000,000. The company's average operating assets for the year were $1,200,000 and its minimum required rate of return was 13%. Required: Compute the company's residual income for the year. Answer is complete but not entirely correct. Residual income $ 206,000 xarrow_forwardJuniper 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 $490,000 on sales of $1,300,000. The company’s average operating assets for the year were $1,500,000 and its minimum required rate of return was 11%. Required: Compute the company’s residual income for the year. Residual income. _____arrow_forwardJuniper Design, provides design services to residential developers. Last year, the company had net operating income of $450,000 on sales of $1,700,000. The company's average operating assets were $1,900,000 and its minimum required rate of return was 14%. Required: Compute the company's residual income. Residual incomearrow_forward
- 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 $490,000 on sales of $1,300,000. The company’s average operating assets for the year were $1,500,000 and its minimum required rate of return was 11%. Required: Compute the company’s residual income for the year. Answer is complete but not entirely correct. Residual income $347,000selected answer incorrectarrow_forwardJuniper Design Limited of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of $450,000 on sales of $2,000,000. The company's average operating assets for the year were $2,200,000 and its minimum required rate of return was 13%. Required: Compute the company's residual income for the year. Residual incomearrow_forwardJuniper Design Limited of Manchester, England, provides design services to residential developers. Last year, the company had net operating income of $410,000 on sales of $1,500,000. The company's average operating assets for the year were $1,700,000 and its minimum required rate of return was 15%. Required: Compute the company's residual income for the year. Residual incomearrow_forward
- Juniper Design Limited of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of $430,000 on sales of $2,200,000. The company’s average operating assets for the year were $2,400,000 and its minimum required rate of return was 14%. Required: Compute the company’s residual income for the year.arrow_forwardJuniper 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 $480,000 on sales of $2,200,000. The company’s average operating assets for the year were $2,400,000 and its minimum required rate of return was 10%. Required: Compute the company’s residual income for the year.arrow_forwardFan-Tastic Sports Gear Inc. recorded $3,000,000 of sales last year and projects sales to increase by $350,000 in the current year. Last year, 80% of sales were on account, with over 300 customer accounts. Bad debt expense was $26,187. 1. Assume that Fan-Tastic Sports Gear Inc. used the allowance method last year, and the allowance account at the end of the year had a debit balance of $2,240. The company estimated uncollectible accounts expense using the percent of credit sales method and expected 0.75% of credit sales to be uncollectible. What is the amount of the adjusting entry to provide for doubtful accounts on December 31? Round all computations to the nearest dollar. $arrow_forward
- Eucalyptus Design Ltd. of Canberra, Australia, is a company specializing in providing design services to residential developers. Last year, the company had net operating income of $614,000 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. Residual income 96,000arrow_forwardFan-Tastic Sports Gear Inc. recorded $2,900,000 of sales last year and projects sales to increase by $350,000 in the current year. Last year, 80% of sales were on account, with övel 300 customer accounts. Bad debt expense was $26, 187. 1. Assume that Fan-Tastic Sports Gear Inc. used the allowance method last year, and the allowance account at the end of the year had a debit balance of $2.240. The company estimated uncollectible accounts expense using the percent of credit sales method and expected 0.75% of credit sales to be uncollectible. What is the amount of the adjusting entry to provide for doubtful accounts on December 317 Round all computations to the nearest dollar. S 2. How much higher (lower) would Fan-Tastic Sports Gear Inc's net income have been under the allowance method assumption previously shown in (1) than under the direct write off method? (Enter "o it there is no change.) Higher by S Balance sheet 3. Usina the allowance method, the net realizable value of the…arrow_forwardLost Peak ski resort located in Montana caters to day skiers from nearby towns. Last year the company had net operating income of $500,000 on sales of $1,300,000. Lost Peak's average operating assets for the year were $1,500,000 and its minimum required rate of return was 13% Required: Compute the company's residual income for the year. Residual incomearrow_forward
- Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning