Chapter 6, Problem 6.22P

To determine

Concept Introduction:

Concept Introduction:

Return on investment (ROI):

Return on investment is a profitability ratio that represents the percentage return on the investment made. It is calculated by dividing the Net Income by the Average total assets. The formulas to calculate the ROI are as follows:

  $ROI =\frac{OperatingIncome}{Averagetotalassets}$

Requirement-a:

To Calculate:

The ROI for Tellco Inc. for 2016

To determine

Concept Introduction:

Concept Introduction:

Return on investment (ROI):

Return on investment is a profitability ratio that represents the percentage return on the investment made. It is calculated by dividing the Net Income by the Average total assets. The formulas to calculate the ROI are as follows:

  $ROI =\frac{OperatingIncome}{Averagetotalassets}$

Requirement-b:

To Calculate:

The ROI for Tellco Inc. for 2016 after capitalization

To determine

Concept Introduction:

Concept Introduction:

Return on investment (ROI):

Return on investment is a profitability ratio that represents the percentage return on the investment made. It is calculated by dividing the Net Income by the Average total assets. The formulas to calculate the ROI are as follows:

  $ROI =\frac{OperatingIncome}{Averagetotalassets}$

Requirement-c:

To Indicate:

The reason why the company would like to record expenditure as expense rather than capitalization

To determine

Concept Introduction:

Concept Introduction:

Return on investment (ROI):

Return on investment is a profitability ratio that represents the percentage return on the investment made. It is calculated by dividing the Net Income by the Average total assets. The formulas to calculate the ROI are as follows:

  $ROI =\frac{OperatingIncome}{Averagetotalassets}$

Requirement-d:

To Indicate:

The effect of the capitalization on the ROI for the year 2017