Balance Sheet Year 1 Year 2 Current Assets: cash: $142,000 $110,000 AR $104,000
ID: 2470116 • Letter: B
Question
Balance Sheet Year 1 Year 2
Current Assets:
cash: $142,000 $110,000
AR $104,000 $120,000
Inventory $119,000 $120,000
PP Expenses $37,000 $40,000
Total Current Assets $402,000 $390,000
Plant & Equip Net
Total Assets$1,119,000 $1,110,000
Liabilities & Stockholders Equity
Current Liabilities:
Accounts Payable: $156,000 $180,000
Accued liabilities: $84,000 $70,000
Notes Payable, short term: $66,000 $60,000
Total Current Liabilities: $306,000 $310,000
Bonds Payable $250,000 $250,000
Total Liabilities $556,000 $560,000
Stockholders Equity
Common Stock par value $4 $240,000 $240,000
Addtl Paid in Capital common stock $90,000 $90,000
Retained earning $233,000 $220,000
Total Stockholders Equity is $563,000 $560,000
Total Liabilities & SE $1,119,000 $1,110,000
INCOME STMT YEAR 2
Sales $1,360,000
COGS $850,000
Gross Margin $510,000
Operating Expense $4462,692
Net Operating Income $47,308
Interest Expense $19,000
Net income before taxes $28,308
Income Taxes $9,908
Net Income $18,400
Dividends on common stock during Year 2 totaled $5,400. The market price of common stock at the end of Year 2 was $5.89 per share.
The company's return on total assets for Year 2 is closest to:
2.75%
1.64%
1.65%
2.76%
2.75%
1.64%
1.65%
2.76%
Explanation / Answer
The Return on Total Assets is given by the formula = Net Income for the year/Average Total Assets
= 8400/(1119000+1110000)/2 = 18400/1114500 = 0.01650965
= 1.65 %
Note: There is a variation to this formula as far as the numerator is concerned
Some use the formula EBIT(1-t)/Average total assets
Here, the values are = 47308*0.65/1114500 = 30750.2/1114500 =0.02759103 = 2.76%
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