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Dear Sir.
I have one question which one to ask you.
A division reports a profit of $80,000 on net assets of $400,000. The company has a target rate of return of 10%. The company also has the non controlled net assets of $150,000.
Calculate the residual income.Answer.
RI= 80,000-(400,000*10%)= 40,000.
Is that right? Or I need to concern about the non controlled net assets.
Thank you.
The answer is correct.
It is because the question says that they ALSO have non-controlled net assets. So these extra non-controlled net assets have not been included in the arithmetic.
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