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Chapter 2: 26BP_a (page 83)

In January 2007, the Status Quo Company was formed. Total assets were \(544,000, of which \)306,000 consisted of depreciable fixed assets. Status

Quo uses straight-line depreciation of \(30,600 per year, and in 2007 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been \)29,000 per year each of the last 10 years. Other assets have not changed since 2007.

a. Compute return on assets at year-end for 2007, 2009, 2012, 2014, and 2016.

(Use $29,000 in the numerator for each year.)

Short Answer

Expert verified

Year

Return on assets

2007

5.65%

2009

6.41%

2012

8.05%

2014

9.69%

2016

12.18%

Step by step solution

01

Current Assets for the year ending 2007, 2009, 2012, 2014, and 2016 

Currentassets=Totalassets-Fixedassets=$544,000-$306,000=$238,000

02

Fixed assets

Year

Opening balance (a)

Depreciation(b)

Closing balance (a – b)

2007

$306,000

$30,600

$275,400

2008

275,400

30,600

244,800

2009

244,800

30,600

214,200

2010

214,200

30,600

183,600

2011

183,600

30,600

153,000

2012

153,000

30,600

122,400

2013

122,400

30,600

91,800

2014

91,800

30,600

61,200

2015

61,200

30,600

30,600

2016

$30,600

$30,600

0

03

Total assets

Year

Fixed assets (a)

Current assets (b)

Total assets (a+b)

2007

$275,400

$238,000

$513,400

2009

214,200

238,000

452,200

2012

122,400

238,000

360,400

2014

61,200

238,000

299,200

2016

0

$238,000

$238,000

04

Return on assets

Year

Net Income (a)

Total assets (b)

Return on assets (a/b)

2007

$29,000

$513,400

5.65%

2009

29,000

452,200

6.41%

2012

29,000

360,400

8.05%

2014

29,000

299,200

9.69%

2016

$29,000

$238,000

12.18%

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Most popular questions from this chapter

Assume the following data for Cable Corporation and Multi-Media Inc.

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