Question

20X4 20X3 Cash $ 5,100 $ 4,800 Accounts Receivable $ 9,010 $ 6,100 Inventory $ 10,400 $ 14,000 Prepaid Expenses $ 1,950 $ 1,020 Equipment $ 58,500 $ 59,900 Accumulated Depreciation - equipment $ (33,100) $ (32,000) Total Assets $ 51,860 $ 53,820 Account Payable $ 7,000 $ 11,400 Interest Payable $ 350 $ 110 Income taxes payable $ 650 $ 500 Dividends Payable $ 2,400 $ 3,200 Long-term Notes Payable $ 17,500 $ 17,000 Common shares $ 22,000 $ 20,000 Retained Earnings $ 1,960 $ 1,610 Total Liabilities & Shareholders' Equity $ 51,860 $ 53,820 Great Lakes Manufacturing Inc. Income Statement Year Ended December 31, 20X4 in (000)'s Sale $ 130,000 Cost of goods sold $ 97,000 Gross Profit $ 33,000 Operating Expenses $ 30,000 Gain on Sale of equipment $ (1,000) $ 29,000 Profit from Operations $ 4,000 Other expenses Interest Expense $ 200 Profit before Income Tax $ 3,800 Income Tax Expense $ 1,550 Profit $ 2,250 Additional Information: Operating expenses include depreciation expense of $3,500,000 Accounts Payable related to the purchase of inventory Equipment that cost $3,900,000 was sold at a gain of $1,000,000 New equipment was purchased during the year for $2,500,000 Dividends declared and paid in 20X4 totaled $1,900,000 Common shares were sold for $2,000,000 cash Interest payable in 20X4 was $240,000 greater than interest payable in 20X3 Total return on sales at December 20X4 was:

0%

1%

2%

Equal of above 3%

Not enough data provided to calculate it

Answer 1

Return on sales (ROS)-Net Income/ Sales Sales (000)'s Net Income/Profit (000)'s Return on sales [$2250/$130000] Return on sales Rounding off $130,000 $2,250 1.73% 2% correct answer is 2%