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Business Accounting Managerial Accounting

Return on Assets: The Return on assets is profitability ratio that measures the percentage of profit earned on average assets invested in the business. Return on asset is calculated by dividing the net income by average total assets. The formula to calculate Return on assets is as follows: R e t u r n o n a s s e t s = N e t i n c o m e A v e r a g e T o t a l A s s e t s Note: Average total assets are calculated as average of beginning and ending total assets. The formula to calculate the average total assets is as follows: A v e r a g e t o t a l A s s e t s = ( B e g i n n i n g t o t a l a s s e t s + E n d i n g t o t a l a s s e t s ) 2 To determine: The Return on assets ratio Solution: The Return on assets ratio is calculated as follows: R e t u r n o n a s s e t s = N e t i n c o m e A v e r a g e T o t a l A s s e t s R e t u r n o n a s s e t s = 64680 455000 = 0 .1422 = 14 .22% Hence, the Return on assets ratio is 14.22% Working Notes: Net income is calculated after subtracting income tax @ 30% = 92400-(92400*30%) = $64,680 The Calculation of Average total assets is as follows: A v e r a g e t o t a l A s s e t s = ( B e g i n n i n g t o t a l a s s e t s + E n d i n g t o t a l a s s e t s ) 2 A v e r a g e t o t a l A s s e t s = ( 460000 + 45000 ) 2 = 455,000

Return on Assets: The Return on assets is profitability ratio that measures the percentage of profit earned on average assets invested in the business. Return on asset is calculated by dividing the net income by average total assets. The formula to calculate Return on assets is as follows: R e t u r n o n a s s e t s = N e t i n c o m e A v e r a g e T o t a l A s s e t s Note: Average total assets are calculated as average of beginning and ending total assets. The formula to calculate the average total assets is as follows: A v e r a g e t o t a l A s s e t s = ( B e g i n n i n g t o t a l a s s e t s + E n d i n g t o t a l a s s e t s ) 2 To determine: The Return on assets ratio Solution: The Return on assets ratio is calculated as follows: R e t u r n o n a s s e t s = N e t i n c o m e A v e r a g e T o t a l A s s e t s R e t u r n o n a s s e t s = 64680 455000 = 0 .1422 = 14 .22% Hence, the Return on assets ratio is 14.22% Working Notes: Net income is calculated after subtracting income tax @ 30% = 92400-(92400*30%) = $64,680 The Calculation of Average total assets is as follows: A v e r a g e t o t a l A s s e t s = ( B e g i n n i n g t o t a l a s s e t s + E n d i n g t o t a l a s s e t s ) 2 A v e r a g e t o t a l A s s e t s = ( 460000 + 45000 ) 2 = 455,000

Managerial Accounting

Managerial Accounting

15th Edition

ISBN: 9780078025631

Author: Ray H Garrison, Eric Noreen, Peter C. Brewer Professor

Publisher: McGraw-Hill Education

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Chapter 15, Problem 3F15

Chapter 15, Problem 5F15

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Chapter 15 Solutions

Managerial Accounting

Ch. 15 - Prob. 1Q Ch. 15 - What is the basic purpose for examining trends in...Ch. 15 - Prob. 3Q Ch. 15 - Prob. 4Q Ch. 15 - Prob. 5Q Ch. 15 - Prob. 6Q Ch. 15 - Prob. 7Q Ch. 15 - Prob. 8Q Ch. 15 - A company seeking a line of credit at a bank was...Ch. 15 - Prob. 1F15

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