Question

the balance sheet at the end of the first 2 years of operations indicate the following...

the balance sheet at the end of the first 2 years of operations indicate the following

2012.                                               2011
total current assets 600000.          560000
total investments 60000.                40000
property plant & equip 900000.     700000
total current liab.         125000.        65000
long term liab.              350000.       250000
pref. 9% stock 100 par.   100000.     100000
common stock 10 par.     600000.    600000
paid in capital in excess of par common stock
                                           75000.       75000
retained earnings.            310000.       210000

If net income is 115000 and interest exp is 30000 for 2012 what is the rate earned on total assets for 2012 round to one decimal point

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Answer #1
CALCULATION OF AVERAGE OF TOTAL ASSETS
2012 2011
Total Current Assets $     6,00,000 $   5,60,000
Total Investment $        60,000 $      40,000
Total Prop. Plant and Equipment $     9,00,000 $   7,00,000
Total Assets $ 15,60,000 $13,00,000
(A) (B)
Average Total Assets (A + B) / 2= $ 14,30,000
Rate earned on Total Assets = Net Income / Average of Total Assets
Rate earned on Total Assets = $115,000 / $ 14,30,000
Rate earned on Total Assets = 0.080 or 8.0%
Answer = 8.0%
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