Question

In January 2007, 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 2007 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been $57,000 per year for each of the last 10 years. Other assets have not changed since 2007

Compute return on assets at year-end for 2007, 2009, 2012, 2014, and 2016. (Use $57,000 in the numerator for each year.)

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Answer 1

A Lara Ubuntu solution L After Tax income - $57,000 per year In Jan 2007 2 Total Asset = $ 547,000 Depreciable fixed Asset - $381,000 Current Asset = Total Asset- Fixed Asset - $547,000 - $381,000 2 $ 166,000 current asset will remain same for all the to years. We have to calculate Book value of Fixed Asset at the end of 2007, 2009, 2012, 2014 and 2016.

year 2007 For that we will construct depreciation schedule for 10 years Fixed Asset Beginning Depreciation = Fixed Asset At end $381,000 $38,100 $ 342,900 2008 342,900 38,100 304,800 2009 304,800 38,100 266,700 2010 266,700 38,100 228,600 2011 228,600 38,100 190,500 2012 190,500 38,100 152,400 2013 152,400 38,100 114,300 2014 114,300 38,100 76,200 2015 76,200 38,100 38,100 2016 38,100 CO 38,100 Return on Asset = After Tax Income current Assett Fixed Asset At the 2007 end ) ROA = $ 57,000 $ 166,000 +$342,900 $57,000 - - 0.096774 $ 508,900 or 9.67% capprox)

At 2009 and ROA = $ 57,000 $ 166,000+$266,700 z $57,000 $432,700 2 0.131730 or 1317% cap poor) 2012 and a ROA = $57,000 $166,000+ $152,400 = $ 57,000 - $318,400 = 0.179020 Or 17. 90% (approx) 2014 and ROH = $57,000 $166,000+$76,200 L0235342 00 23,537.(approx) $242,200 2016 and ROA = $57,000 $166,000+ 0 = 0.34337 Or 34.38% Capprox)