Chapter 1, Problem 2BTN

1.

To determine

To identify: The total amount of asset invested in A Company and in G Company..

Explanation of Solution

(a)

For A Company

The total asset invested in A Company is $290,479

As per the accounting equation the asset will always equal to the sum of liabilities and equity. This equation represents that the assets are enough to pay the dues and to the shareholders. So the amount of asset invested in a company is $290,479.

Thus, the total amount of asset is $290,479.

(b)

For G Company

The total asset invested in G Company is $147,461

As per the accounting equation the asset will always equal to the sum of liabilities and equity. This equation represents that the assets are enough to pay the dues and to the shareholders. So the amount of asset invested in a company is $147,461.

Thus, the total amount of asset is $147,461.

2.

To determine

To compute: Return on asset of A Company and G Company.

Explanation of Solution

(a)

Given,
Net income is $53,394 million.
Assets in the beginning of the year is $231,839 million
Assets at the end of the year is $290,479 million

The formula to calculate return on asset is,

$\text{Return on assets}=\frac{\text{Net Income}}{\text{Average Total Assets}}$

Substitute $53,394 million for net income, $231,839 million for assets in the beginning, $290,479 million for assets at the end.

$\begin{array}{c}\text{Return on Assets}=\frac{\$53,394\text{million}}{\frac{\$231,839\text{million}+\$290,479\text{million}}{2}}\\ =\frac{\$53,394\text{million}}{\$261,159\text{million}}\\ =20.4\%\end{array}$

Hence, the return on asset of A Company is 20.4%.

(b)

Given,
Net income is $16,348 million.
Assets in the beginning of the year is $129,187 million
Assets at the end of the year is $147,461 million

The formula to calculate return on asset is,

$\text{Return on assets}=\frac{\text{Net Income}}{\text{Average Total Assets}}$

Substitute $16,384 million for net income, $129,187 million for assets in the beginning, $147,461 million for assets at the end.

$\begin{array}{c}\text{Return on Assets}=\frac{\$16,384\text{million}}{\frac{\$129,187\text{million}+\$147,461\text{million}}{2}}\\ =\frac{\$16,384\text{million}}{\$138,324\text{million}}\\ =11.8\%\end{array}$

Hence, the return on asset of G Company is 11.8%.

3.

To determine

To compute: The total expenses of A Company and G Company.

Explanation of Solution

(a)

Given,
Net income is $53,394 million.
Revenue is $233,715 million

The formula to calculate expenses is,

$\text{Expenses}=\text{Revenue}-\text{Income}$

Substitute $53,394 million for net income and $233,715 million for revenues.

$\begin{array}{c}\text{Expenses}=\$233,715\text{million}-\$53,394\text{million}\\ =\$180,321\text{million}\end{array}$

Hence, the expenses of A Company are $180,321 million.

(b)

Given,
Net income is $16,348 million.
Revenue is $74,989 million.

The formula to calculate expenses is,

$\text{Expenses}=\text{Revenue}-\text{Income}$

Substitute $16,348 million for net income and $74,989 million for revenues.

$\begin{array}{c}\text{Expenses}=\$74,989\text{million}-\$16,348\text{million}\\ =\$58,641\text{million}\end{array}$

Hence, the expenses of G Company are $58,641 million.

4.

To determine

To compare: The return on asset of A Company and G Company with their competitors.

Explanation of Solution

(a)

The return on assert of A Company is more than to its competitors.

As the A Company return on asset is 20.4%, which is more than 10% the return on asset of competitors.

Thus, the performance of A Company is satisfactory.

(b)

The return on assert of G Company is more than to its competitors.

As the A Company return on asset is 11.8%, which is more than 10% the return on asset of competitors.

Thus, the performance of G Company is satisfactory.

5.

To determine

To Analyze: Analyze the performance of A Company and G Company.

Explanation of Solution

The return on assets of A Company is 20.4% which is better than the competitor and the return on asset of G Company.

The return of asset of G Company is 11.8% which is better than the competitor.

Thus, the performance of A Company is better than the G Company.