The balance sheet of Hidden Valley Farms reports total assets of $450,000 and $550,000 at the beginning and end of the year,respectively.The return on assets for the year is 10%.What is Hidden Valley's net income for the year?

Question

Quizplus · Accepted Answer

The formula for calculating net income is:

Net Income = Return on Assets x Average Total Assets

We are given the Return on Assets (10%) and the Average Total Assets, which can be calculated as:

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2

Average Total Assets = ($450,000 + $550,000) / 2
Average Total Assets = $500,000

Substituting these values into the formula, we get:

Net Income = 10% x $500,000
Net Income = $50,000

Therefore, the net income for the year is $50,000, which is option D.

The Balance Sheet of Hidden Valley Farms Reports Total Assets