What are Bleach's and Cleanser's residual incomes based on book values, respectively

ACCOUNTING

Multiple Choice

Ruth Cleaning Products manufactures home cleaning products. The company has two divisions, Bleach and Cleanser. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for 20x3:


ASSETS

INCOME


Book value

Current value

Book value

Current value

Bleach

$225,000

$300,000

$150,000

$155,000

Cleanser

$450,000

$250,000

$100,000

$105,000

The company is currently using a 15% required rate of return.


What are Bleach's and Cleanser's residual incomes based on book values, respectively?

a. $116,250; $32,500

b. $110,000; $67,500

c. $67,500; $110,000

d. $37,500; $116,250

Click here for the SOLUTION