Residual IncomeWashington Company has two divisions: the Adams Division and the Jefferson Division.
June 7th, 2024
Residual IncomeWashington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year’s results:Adams DivisionJefferson DivisionNet (after-tax) income$ 605,000$ 315,000Total capital employed4,000,0003,250,000In addition, Washington Company’s 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.