I understand how they got the answer. In the text book it listed: Jan 1 2016 Dec 31 2016Total Owner's Equity 198,300 214,200I do not see this calcuated in the average assets nor in the solution I also see: Jan 1 2016 Dec 31 2016Notes Payable 34,000 54,000I 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 assetsemployed. The Average assets employed is taken in to consideration as there may be a movement of assetsduring 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 assetsearned by the business.Requirement:TheReturn on assets for Alec Appliance Service for the year ending Dec31 2016. Answer to Problem E1.39ETheReturn on assets has been computed for Alec Appliance Service as 7%.Explanation of SolutionThe Return on assets has been computed as under:Computation of Return on Assets:Net income earned during the periodDivide: Average Assets for the periodReturn on Assets:(Net income earned/ Average Assets) *100For the purpose of computing the return on assets, the average assets employed by the business during theperiod has been computed as under:Computation of Average assets employedCashAccounts receivableOffice SuppliesBuildingEquipmentFurnitureTotal Assets182002600007%Average Assets:(Assets in Beginning +Assets at end)/2Jan01 2016 Dec31 20163900016004200155000220002000024180020200184006001550004600038000278200260000ConclusionTo conclude, it must be said that return on capital employed shall be computed by dividing the net incomeafter tax by average assets employed.

Return on Asset = Net income/Average asset Net income = Income - expenses Average asset = (Opening…

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: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter13: Financial Statement Analysis

Section: Chapter Questions

Problem 13.15E

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Similar questions

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