The following information is extracted from Automotive Division for the year ended 31st December 2021: Statement of Financial Position USD Non-current Assets 120,000 Current Assets 67,000 TOTAL ASSETS 187,000 Divisional Equity 93,700 Long Term Liabilities 75,000 Current Liabilities 18,300 TOTAL EQUITY & LIABILITIES 187,000 Income Statement USD Revenue 115,000 (-) Cost of Goods Sold (COGS) (48,000) (-) Other operating expense (10,000) Operating Profit 57,000 (-) Interest Paid (17,000) Profit Before Tax 40,000 The cost of capital for the division is estimated at 8% each year. You are required to calculate: i) Calculate the divisional Return on Investment (ROI) for the year ended 31st December 2021 using net assets approach. ii) Calculate the Residual Income (RI) for the year ended 31 December 2021.
The following information is extracted from Automotive Division for the year ended 31st December 2021: Statement of Financial Position USD Non-current Assets 120,000 Current Assets 67,000 TOTAL ASSETS 187,000 Divisional Equity 93,700 Long Term Liabilities 75,000 Current Liabilities 18,300 TOTAL EQUITY & LIABILITIES 187,000 Income Statement USD Revenue 115,000 (-) Cost of Goods Sold (COGS) (48,000) (-) Other operating expense (10,000) Operating Profit 57,000 (-) Interest Paid (17,000) Profit Before Tax 40,000 The cost of capital for the division is estimated at 8% each year. You are required to calculate: i) Calculate the divisional Return on Investment (ROI) for the year ended 31st December 2021 using net assets approach. ii) Calculate the Residual Income (RI) for the year ended 31 December 2021.
Chapter9: Responsibility Accounting And Decentralization
Section: Chapter Questions
Problem 5PA: Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an...
Related questions
Question
The following information is extracted from Automotive Division for the year ended 31st
December 2021:
| USD | |
| Non-current Assets | 120,000 |
| Current Assets | 67,000 |
| TOTAL ASSETS | 187,000 |
| Divisional Equity | 93,700 |
| Long Term Liabilities | 75,000 |
| Current Liabilities | 18,300 |
| TOTAL EQUITY & LIABILITIES |
187,000 |
Income Statement
| USD | |
| Revenue | 115,000 |
| (-) Cost of Goods Sold (COGS) | (48,000) |
| (-) Other operating expense | (10,000) |
| Operating Profit | 57,000 |
| (-) Interest Paid | (17,000) |
| Profit Before Tax | 40,000 |
The cost of capital for the division is estimated at 8% each year.
You are required to calculate:
i) Calculate the divisional
ii) Calculate the Residual Income (RI) for the year ended 31 December 2021.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,