Question

Peartree Inc. provides the following​ data:

2015 2014
Cash $47,000 ​$25,000
Accounts​ Receivable, Net 99,000 ​62,000
Merchandise Inventory 79,000 ​50,000
​Property, Plant, and​
Equipment, Net 181,000 ​ 120,000
Total assets $406,000 ​$257,000
Additional​ information:
Net sales $530,000
Cost of Goods Sold 150,000
Interest expense 24,000
Net income 181,000
Calculate the return on total assets for the year 2015.
A.​ 62.03%.B.​ 45.79%.C.​ 50.74%.D. ​71.98%.

Answer 1

Answer: 61.84%

Step-by-step explanation:

The Return on Assets is a ratio that measures how effectively assets are being utilized to earn revenue.

The formula is;

Return on total Asset = Operating Income /Average Total assets

Operating Income = Net Income + Interest expense = 181,000 + 24,000 = $205,000

Average Total Assets = (Beginning Assets + Ending Assets) / 2 = (406,000 + 257,000) / 2 = $331,500

Return on Assets = 205,000/331,500 = 61.84%

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