Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year, the company had net operating income of $480,000 on sales of $1,400,000. The company’s average operating assets for the year were $1,600,000 and its minimum required rate of return was 14%.

Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year, the company had net operating income of $480,000 on sales of $1,400,000. The company’s average operating assets for the year were $1,600,000 and its minimum required rate of return was 14%.

Required:

Compute the company’s residual income for the year.

Explanation

Average operating assets	$	1,600,000
Net operating income	$	480,000
Minimum required return: 14% × $1,600,000		224,000
Residual income	$	256,000

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