Problem 3-26 Return on assets analysis [LO2] In January 2001 the Status Quo Comp

Question

Problem 3-26 Return on assets analysis [LO2]

In January 2001 the Status Quo Company was formed. Total assets were $570,000, of which $330,000 consisted of depreciable fixed assets. Status Quo uses straight-line depreciation of $33,000 per year, and in 2001 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been $39,000 per year each of the last 10 years. Other assets have not changed since 2001.

Compute return on assets at year-end for 2001, 2003, 2006, 2008, and 2010. (Use $39,000 in the numerator for each year.) (Round your answers to 2 decimal places. Omit the "%" sign in your response.)

In January 2001 the Status Quo Company was formed. Total assets were $570,000, of which $330,000 consisted of depreciable fixed assets. Status Quo uses straight-line depreciation of $33,000 per year, and in 2001 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been $39,000 per year each of the last 10 years. Other assets have not changed since 2001.

Explanation / Answer

Calculation of Return on Total Assets   Year Aftertax income Depreciable Assets Other Assets Total Assets Return on assets A B C D =B+C A/D   2001 39000 297000 240000 537000 7.26% (330000-33000) (570000-330000)   2003 39000 231000 240000 471000 8.28% (297000-33000*2)   2006 39000 132000 240000 372000 10.48% (231000-33000*3)   2008 39000 66000 240000 306000 12.75% (132000-33000*2)   2010 39000 0 240000 240000 16.25% (66000-33000*2)

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.