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I understand how they got the answer. In the text book it listed:                                       Jan 1 2016          Dec 31 2016 Total Owner's Equity     198,300               214,200 I do not see this calcuated in the average assets nor in the solution  I also see:                                       Jan 1 2016          Dec 31 2016 Notes Payable              34,000                 54,000 I do not see this calcuated in the average assets nor in the solution  Do they not include this in the net income or average assets?

I understand how they got the answer. In the text book it listed:                                       Jan 1 2016          Dec 31 2016 Total Owner's Equity     198,300               214,200 I do not see this calcuated in the average assets nor in the solution  I also see:                                       Jan 1 2016          Dec 31 2016 Notes Payable              34,000                 54,000 I do not see this calcuated in the average assets nor in the solution  Do they not include this in the net income or average assets?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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I understand how they got the answer. In the text book it listed:
                                      Jan 1 2016          Dec 31 2016
Total Owner's Equity     198,300               214,200
I do not see this calcuated in the average assets nor in the solution 

I also see:
                                      Jan 1 2016          Dec 31 2016
Notes Payable              34,000                 54,000
I do not see this calcuated in the average assets nor in the solution 

Do they not include this in the net income or average assets? 

Return on Assets: The return on assets is a ratio represent the rate of return the business is earning on its average assets employed. The Average assets employed is taken in to consideration as there may be a movement of assets during the period and it will serve as a better measure for the rate of return to be computed. The Return on assets is computed by dividing the net income earned after taxes by the average total assets earned by the business. Requirement: TheReturn on assets for Alec Appliance Service for the year ending Dec31 2016.
Transcribed Image Text:Return on Assets: The return on assets is a ratio represent the rate of return the business is earning on its average assets employed. The Average assets employed is taken in to consideration as there may be a movement of assets during the period and it will serve as a better measure for the rate of return to be computed. The Return on assets is computed by dividing the net income earned after taxes by the average total assets earned by the business. Requirement: TheReturn on assets for Alec Appliance Service for the year ending Dec31 2016.
Answer to Problem E1.39E TheReturn on assets has been computed for Alec Appliance Service as 7%. Explanation of Solution The Return on assets has been computed as under: Computation of Return on Assets: Net income earned during the period Divide: Average Assets for the period Return on Assets: (Net income earned/ Average Assets) *100 For the purpose of computing the return on assets, the average assets employed by the business during the period has been computed as under: Computation of Average assets employed Cash Accounts receivable Office Supplies Building Equipment Furniture Total Assets 18200 260000 7% Average Assets: (Assets in Beginning +Assets at end)/2 Jan01 2016 Dec31 2016 39000 1600 4200 155000 22000 20000 241800 20200 18400 600 155000 46000 38000 278200 260000 Conclusion To conclude, it must be said that return on capital employed shall be computed by dividing the net income after tax by average assets employed.
Transcribed Image Text:Answer to Problem E1.39E TheReturn on assets has been computed for Alec Appliance Service as 7%. Explanation of Solution The Return on assets has been computed as under: Computation of Return on Assets: Net income earned during the period Divide: Average Assets for the period Return on Assets: (Net income earned/ Average Assets) *100 For the purpose of computing the return on assets, the average assets employed by the business during the period has been computed as under: Computation of Average assets employed Cash Accounts receivable Office Supplies Building Equipment Furniture Total Assets 18200 260000 7% Average Assets: (Assets in Beginning +Assets at end)/2 Jan01 2016 Dec31 2016 39000 1600 4200 155000 22000 20000 241800 20200 18400 600 155000 46000 38000 278200 260000 Conclusion To conclude, it must be said that return on capital employed shall be computed by dividing the net income after tax by average assets employed.
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