Black Sea Company Has Two Divisions, the Old Division and the New

Essay

Black Sea Company has two divisions, the Old Division and the New Division. Last year, the Old Division earned operating income of $66,000 using average operating assets of $550,000. Last year, the New Division earned $260,000 of operating income using average operating assets of $2,000,000. Minimum required rate of return for Black Sea is 9%.
Required:
A. For the Old Division, residual income is __________________.
B. For the New Division, residual income is __________________.
Now assume that the minimum required rate of return for Black Sea is 12%.
C. For the Old Division, residual income is __________________.
D. For the New Division, residual income is __________________.