Question

Jester Corporation's most recent income statement appears below:

Income Statement
Sales (all on account)	$	200,000
Cost of goods sold		90,000
Gross margin		110,000
Selling and administrative expense		34,000
Net operating income		76,000
Interest expense		16,000
Net income before taxes		60,000
Income taxes (30%)		18,000
Net income	$	42,000

The beginning balance of total assets was $200,000 and the ending balance was $191,000. The return on total assets is closest to:

A) 27.2%

B) 30.7%

C) 38.9%

D) 21.5%

Answer 1

• All working forms part of the answer
• Correct answer = Option ‘D’ 21.5%

A	Net Income	$                42,000
B	Beginning Total Assets	$              200,000
C	Ending Total Assets	$              191,000
D = (B+C)/2	Average Total Assets	$              195,500
E = (A/D) x 100	Return on Total Assets	21.5%