Question

Required information The Foundational 15 (LO14-2, L014-3, L014-4, LO14-5, LO14-6) (The following information applies to the questions displayed below.) Markus Company's common stock sold for $2.75 per share at the end of this year. The company paid a common stock dividend of $0.55 per share this year. It also provided the following data excerpts from this year's financial statements: Ending Beginning Balance Balance Cash $ 35,000 $ 30,000 Accounts receivable $ 60,000 $ 50,000 Inventory $ 55,000 $ 60,000 Current assets $ 150,000 $ 140,000 Total assets $ 450,000 $ 460,000 Current liabilities $ 60,000 $ 40,000 Total liabilities $ 130,000 $ 120,000 Common stock, $1 par value $ 120,000 $ 120,000 Total stockholders' equity $ 320,000 $340,000 Total liabilities and stockholders' equity $450,000 $ 460,000 This Year Sales (all on account) $ 700,000 Cost of goods sold $ 400,000 Gross margin $ 300,000 Net operating income $ 140,000 Interest expense $ 8,000 Net income $ 92,400 Foundational 14-4 4. What is the return on total assets (assuming a 30% tax rate)? (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) Answer is complete but not entirely correct. 20.30 Return on total assets

Answer 1

The return on total assets is calculated below:

Return on total assets = EBIT / Average Total Assets *100

Average Total Assets = ( Total Assets Begining + Total Assets Ending ) /2

= ($460,000 + $450,000) / 2

= $455,000

Return on total assets = $140,000 / $455,000 *100

= 30.77%

The return on total assets is 30.77%