Question

The balance sheet of Hidden Valley Farms reports total assets of $810,000 and $945,000 at the beginning and end of the year, respectively. The return on assets for the year is 15%. What is Hidden Valley's net income for the year

Answer 1

$131,625

Step-by-step explanation:

The computation of the net income for the year is shown below:

As we know that

Return on assets = net income ÷ average assets

0.15 = net income ÷ ($810,000 + $945,000) ÷ 2

0.15 = net income ÷ $877,500

So, the net income is

= $877,500 × 0.15

= $131,625

hence, the net income for the year is $131,625

We simply applied the above formula