Question
Problem 3-26 Return on assets analysis [LO2] In January 2004, the Status Quo Company was formed. Total assets were $547,000, of which $381,000 consisted of
Problem 3-26 Return on assets analysis [LO2]
In January 2004, the Status Quo Company was formed. Total assets were $547,000, of which $381,000 consisted of depreciable fixed assets. Status Quo uses straight-line depreciation of $38,100 per year, and in 2004 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been $57,000 per year foreach of the last 10 years. Other assets have not changed since 2004. |
a. | Compute return on assets at year-end for 2004, 2006, 2009, 2011, and 2013. (Use $57,000 in the numerator for each year.)(Input your answers as a percent rounded to 2 decimal places.) |
Year | Return on Assets |
2004 | % |
2006 | % |
2009 | % |
2011 | % |
2013 | % |
b. | To what do you attribute the phenomenon shown in parta? | |||
|
c. | Now assume income increased by 10 percent each year. What effect would this have on your answers to part a? |
Return on assets will be(Click to select)lowerhigher. |
References
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