Question

Watermelon, Inc. provides the following data: 20X9 20X8 Cash $41,000 $25,000 Accounts Receivable, Net 102,000 62,000 Merchandise Inventory 72,000 50,000 Property, Plant, and Equipment, Net 181,000 120,000 Total Assets $396,000 $257,000 Additional information for the year ending December 31, 20X9: Net Credit Sales $550,000 Cost of Goods Sold 150,000 Interest Expense 25,000 Net Income 181,000 Calculate the rate of return on total assets for 20X9.

Answer 1

The rate of return on total assets for Watermelon, Inc. for 20X9 is 55.44%, calculated by dividing the net income of $181,000 by the average total assets of $326,500.

Step-by-step explanation:

The rate of return on total assets for Watermelon, Inc. for the year ending December 31, 20X9, is calculated by dividing the net income by the average total assets of 20X8 and 20X9. The formula used to calculate the rate of return on total assets (ROA) is ROA = Net Income / Average Total Assets.

To find the average total assets, you add the total assets at the beginning of the period to the total assets at the end of the period and then divide by two. For Watermelon, Inc., this is ($257,000 for 20X8 + $396,000 for 20X9) / 2 = $326,500 average total assets. The net income for 20X9 is $181,000. Therefore, ROA for 20X9 is $181,000 / $326,500 = 0.5544 or 55.44% when expressed as a percentage.

Answer 2

the rate of return on total assets is 63.09%

Step-by-step explanation:

The calculation of the rate of return on total assets is shown below:

Return on total Asset is

= {(Net Income + Interest Expense) ÷ Average Total assets} × 100

= {($181,000 + $25,000) ÷ ($396,000 + $257,000) ÷ 2} × 100

= $206,000 ÷ $326,500 × 100

= 63.09%

Hence, the rate of return on total assets is 63.09%