The following data pertain to Cowl, Inc., for the year ended December 31, 20X4: What was Cowl's rate of return on assets for 20X4?

Question

The following data pertain to Cowl, Inc., for the year ended December 31, 20X4:  What was Cowl's rate of return on assets for 20X4?

Quizplus · Accepted Answer

Choice "b" is correct. Rate of return on assets is defined as the net income divided by the average total assets. In this case: $150,000 / [($2,000,000 + $3,000,000)/2] or [$150,000 / $2,500,000] = 6% rate of return. Choice "a" is incorrect. Average total assets ($2,500,000) should be used, not ending assets ($3,000,000). Choice "c" is incorrect. Net income ($150,000) and average total assets ($2,500,000) should be used, not net sales ($600,000) and ending assets ($3,000,000). Choice "d" is incorrect. Net income ($150,000) should be used, not net sales ($600,000).

The Following Data Pertain to Cowl, Inc