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Calculate the residual income for the adams division

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Question: Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year's results:

                                          Adams Division                Jefferson Divison

Net (after-tax) income              $ 605,000                        $ 315,000

Total capital employed              4,000,000                         3,250,000             

Washington's actual cost of capital was 12 percent.

Residual Income Refer to the information for Washington Company on the previous page. In addition, Washington Company's top management has set a minimum acceptable rate of return equal to 8 percent.

Required: 1. Calculate the residual income for the Adams Division.

2. Calculate the residual income for the Jefferson Division.

Reference no: EM131697275

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