# Accounting – Exercise 12-14

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1.

Cornerstone Exercise 12-14 (Algorithmic)
Calculating Residual Income

Pelican Manufacturing earned operating income last year as shown in the following income statement:

Sales

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\$531,250

Cost of goods sold

280,000

Gross margin

\$251,250

184,700

Operating income

\$66,550

At the beginning of the year, the value of operating assets was \$390,000. At the end of the year, the value of operating assets was \$460,000. Pelican requires a minimum rate of return of 10 percent.

For Pelican, calculate:

1. Average operating assets

\$   _________________

2.

Residual income

\$   _________________

2.

 Cornerstone Exercise 12-15 (Algorithmic) Calculating Economic Value Added East Mullett Manufacturing earned net income last year as shown in the following income statement: Total capital employed equaled \$389,000. East Mullett’s actual cost of capital is 8 percent. Calculate the EVA for East Mullett Manufacturing. If required, round your answer to nearest whole number. \$   _________________

3.

 eBookeBookeBook Exercise 12-23 (Algorithmic) The Home Products Division of Schipper Company had operating income last year of \$112,400 and operating assets of \$750,000. Schipper’s minimum acceptable rate of return is 10 percent. Calculate the residual income for the Home Products Division. Round your answer to the nearest dollar. Residual income = \$   _________________

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