Brad\'s BBQ acquired equipment on April 1, 2015, for $17,000. The company estima

Question

Brad's BBQ acquired equipment on April 1, 2015, for $17,000. The company estimates a residual value of $1,800 and a five-year service life.

  

Calculate depreciation expense using the straight-line method for 2015 and 2016, assuming a December 31 year-end.

B)

BBQ reported sales of $600,000 and net income of $35,000 in its 2015 income statement. Brad's also reported total assets of $487,000 in its 2015 balance sheet and $380,000 in its 2014 balance sheet.

Calculate the return on assets, the profit margin, and the asset turnover ratio for Brad's BBQ in 2015.

   

Brad's BBQ acquired equipment on April 1, 2015, for $17,000. The company estimates a residual value of $1,800 and a five-year service life.

Explanation / Answer

Answer to the Question

Part-2

BBQ reported sales of $600,000 and net income of $35,000 in its 2015 income statement. Brad's also reported total assets of $487,000 in its 2015 balance sheet and $380,000 in its 2014 balance sheet.

ROA= (Net income/Total Assets)*100

=(35,000/487,000)*100

=7.19%

Profit Margin=(Net income/Sales)*100

=(35,000/600,000)*100

=5.83%.

Asset turnover ratio= (Net Sales/Avergae total assets)*100

=(35,000/(487,000+380,000))*100

=(35,000/433,500)*100

=8.07%

Particulars Date of purchase of Assets (a) 4/1/2015 Purchase price (b)                              17,000 Useful life ©                                      5 Residual value (d)                                1,800 Depreciable amount €=(b)-(d)                              15,200 Depreciation per annum (f)=€/©                                3,040 Depreciation for 2015 (3040/12*9)                                2,280 Depreciation for 2016 (3040/12*12)                                3,040

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