the balance sheet at the end of the first 2 years of operati

the balance sheet at the end of the first 2 years of operations indicate the following
                                     2012.              2011
total current assets 600000          560000
total investments.     60000.           40000
total prop plant and equip. 900000. 700000
total current liabilities.           125000.    65000
total long term liab.        350000.         250000
preferred 9% stock 100 par. 100000.   100000
common stock $10 par.    600000.      600000
paid in cap in excess of par common stock
                                               75000.      75000
retained earnings.      310000.          210000

If net income is 115000 and interest expense is 30000 for 3012 what is the rate earned on total assets for 2012 round to the nearest 1 decimal point

Solution

CALCULATION OF AVERAGE OF TOTAL ASSETS 2012 2011 Total Current Assets $     6,00,000 $   5,60,000 Total Investment $        60,000 $      40,000 Total Prop. Plant and Equipment $     9,00,000 $   7,00,000 Total Assets $ 15,60,000 $13,00,000 (A) (B) Average Total Assets (A + B) / 2= $ 14,30,000 Rate earned on Total Assets = Net Income / Average of Total Assets Rate earned on Total Assets = $115,000 / $ 14,30,000 Rate earned on Total Assets = 0.08 or 8% Answer = 8%