Q.7SE - Horngren'S Financial And Managerial Accounting

Question

Question: S10-7 Computing rate of return on total assets 

Barot’s 2018 financial statements reported the following items—with 2017 figures given for comparison:

BAROT INC
Balance Sheet
As of December 31, 2018 and 2017
	2018	2017
Total assets	\(32,978	\)30,660
Total liabilities	19,400	11,560
Total stockholder’s equity	13,578	19,100
Total liabilities and stockholder’s equity	\(32,978	\)30,660

Net income for 2018 was \(3,910, and interest expense was \)240. Compute Barot’s rate of return on total assets for 2018. (Round to the nearest percent.)

Step-by-Step Solution

Answer

Answer

The rate of return on total assets is 6.52%.

Step 1: Definition of Interest Expenses

The sacrifices made in respect of the fees charged by the lender against the money borrowed are known as interest expenses.

Step 2: Total rate of return on assets