The following selected data were taken from the financial statements of the Berr
ID: 2337034 • Letter: T
Question
The following selected data were taken from the financial statements of the Berrol Group for December 31, 2012, 2011, and 2010: Dec. 31, 2012 Dec.31, 2011 Dec. 31, 2010 Total assets $3,000,000 $2,700,000 $2,400,000 Notes payable (10% interest) 1,000,000 1,000,000 1,000,000 Common stock 400,000 400,000 400,000 Preferred $6 stock, $100 par (no change during year) 200,000 200,000 200,000 Retained earnings 1,126,000 896,000 600,000 The 2012 net income was $242,000 and the 2011 net income was $308,000. No dividends on common stock were declared between 2010 and 2012. The Rate Earned on Total Assets for 2011 is: Note: No special instruction is given in this problem, so use the appropriate average needed. Interest expense was $100,000. (round your answer to one decimal point) 8.2% 16.0% 15.1% 12.4%
Explanation / Answer
Calculation for Rate Earned on Total Assets
Average Total Assets
= ($ 2,400,000 + $ 2,700,000)/2
= $ 2,550,000
Rate Earned on Total Assets = (Net Income after Interest / Average Total Assets)*100
= ($ 208,000 / $ 2,550,000)*100
= 8.12% (after round off)
2011 Amount ($) Net Income $ 308,000 Less: Interest Expenses $ 100,000 Net Income after Interest $ 208,000