Question

Use this information for Kellman Company to answer the question that follow.

The balance sheets at the end of each of the first two years of operations indicate the following:

Kellman Company
	Year 2	Year 1
Total current assets	$601,300	$554,700
Total investments	65,500	53,500
Total property, plant, and equipment	885,600	794,300
Total current liabilities	108,600	83,300
Total long-term liabilities	290,300	225,400
Preferred 9% stock, $100 par	83,400	83,400
Common stock, $10 par	574,200	574,200
Paid-in capital in excess of par—Common stock	66,300	66,300
Retained earnings	429,600	369,900

Using the balance sheets for Kellman Company, if net income is $115,700 and interest expense is $34,900 for Year 2, what is the return on total assets for the year (rounded to two decimal places)?

a.8.25%

b.5.47%

c.10.19%

d.7.45%

Answer 1

Return on total assets is calculated by way of dividing net income for the year with average total assets

Average total assets is calculated by way of summation of total assets at the beginning of the year with total assets at the end of the year divided by two

Answer is option :(b)