Question

Watermelon, Inc. provides the following data: 20X9 20X8 Cash $41,000 $25,000 Accounts Receivable, Net 102,000 62,000 Merchandise Inventory 72,000 50,000 Property, Plant, and Equipment, Net 181,000 120,000 Total Assets $396,000 $257,000 Additional information for the year ending December 31, 20X9: Net Credit Sales $550,000 Cost of Goods Sold 150,000 Interest Expense 25,000 Net Income 181,000 Calculate the rate of return on total assets for 20X9.

Answer 1

Answer:

the rate of return on total assets is 63.09%

Explanation:

The calculation of the rate of return on total assets is shown below:

Return on total Asset is

= {(Net Income + Interest Expense) ÷ Average Total assets} × 100

= {($181,000 + $25,000) ÷ ($396,000 + $257,000) ÷ 2} × 100

= $206,000 ÷ $326,500 × 100

= 63.09%

Hence, the rate of return on total assets is 63.09%