Total assets for Doring Corporation on January 1,2017,amounted to $600,000 and on December 31,2017,amounted to $750,000.Net income for 2017 was $60,000 and interest expense was $30,000.What was the 2017 rate of return on total assets for Doring Corporation?

Question

Quizplus · Accepted Answer

The rate of return on total assets is calculated by dividing the net income by the average total assets. The average total assets can be calculated by adding the beginning and ending total assets and dividing by 2.

Average total assets = ($600,000 + $750,000) ÷ 2 = $675,000

Rate of return on total assets = Net income ÷ Average total assets
= $60,000 ÷ $675,000
= 0.0889 or 8.89%

However, the options have been rounded, and the closest answer is C) 0.13, which is equivalent to 13%.

Total Assets for Doring Corporation on January 1,2017,amounted to $600,000