Golda Limited has two investment centres. Ali Zaheid is the manager of investment centre 1...
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Accounting
Golda Limited has two investment centres. Ali Zaheid is the manager of investment centre 1 and Lucy Gopal is the manager of investment centre 2. The following information relate to the two investment centres.
|
| Investment centre 1 | Investment centre 2 |
| Profit | $1 200 000 | $350 000 |
| Invested capital | $2 000 000 | $549 000 |
| Imputed interest rate | 15% | 15% |
Required:
1. Calculate residual income for the two investment centres. (2 marks)
2. Lucy Gopal is not happy to hear that residual income only will be used to evaluate the performance of the two centres and the annual bonus for them will be based on 5% of residual income of their centre? Explain why this is unfair for Lucy. (2 marks)
3. Lucy has disclosed the net profit of Golda Limited before the annual report became public. State whether she has broken any of the fundamental code of ethics and specify which one(s). (1 mark)
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