Question

The following data pertain to Cowl, Inc., for the year ended December 31, Year 4:Net sales $600,000Net income 150,000Total assets, January 1, Year 4 2,000,000Total assets, December 31, Year 4 3,000,000
What was Cowl's rate of return on assets for 20X4?
a. 6%.b. 20%.
c.5%.
d. 24%.

Answer 1

Answer:

6%

Explanation:

Calculation for Cowl's rate of return on assets for 20X4

Using this formula

Rate of return on assets=Net income/[(Total assets January 1, Year 4 +Total assets, December 31, Year 4)/2]

Let plug in the formula

Rate of return on assets= $150,000/[($2,000,000 + $3,000,000)/2]

Rate of return on assets= $150,000/($5,000,0000/2)

Rate of return on assets= $150,000/2,500,000

Rate of return on assets= 0.06×100

Rate of return on assets= 6%

Therefore Rate of return on assets will be 6%