Choice "C" is correct. Rate of return on assets is defined as the net income divided by the average total assets. In this case:
$150,000 / [($2,000,000 + $3,000,000) / 2] |
or [$150,000 / $2,500,000]. |
Choice "a" is incorrect. Average total assets ($2,500,000) should be used, not ending assets ($3,000,000).
Choice "b" is incorrect. Net income ($150,000) and average total assets ($2,500,000) should be used, not net sales ($600,000) and ending assets ($3,000,000).
Choice "d" is incorrect. Net income ($150,000) should be used, not net sales ($600,000).
