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Residual Income
The income from operations and the amount of invested assets in each division of Beck Industries are as follows:
| | Income from Operations | Invested Assets |
| Retail Division | $90,000 | | 500,000 | |
| Commercial Division | 119,700 | | 570,000 | |
| Internet Division | 67,600 | | 520,000 | |
Assume that management has established a 10% minimum acceptable return for invested assets.
a. Determine the residual income for each division.
| | Retail Division | Commercial Division | Internet Division |
| Income from operations | $90,000 | $119,700 | $67,600 |
| Minimum acceptable of income from operations | | | | | | |
| Residual income | | | | | | |
b. Which division has the most residual income? Commercial Division
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