Sales are $2,700,000, beginning total assets are $750,000, and the asset turnover is 3.0.What is the ending total assets?
A)$600,000
B)$900,000
C)$1,050,000
D)$1,125,000

Question

Quizplus · Accepted Answer

Asset turnover is calculated as Sales / Average Total Assets. Given the asset turnover is 3.0 and sales are $2,700,000, we can set up the equation 3.0 = $2,700,000 / Average Total Assets. To find the Average Total Assets, we divide $2,700,000 by 3.0, which equals $900,000. The Average Total Assets is the average of the beginning and ending total assets. If the beginning total assets are $750,000, and the average is $900,000, then the ending total assets must be higher than the beginning by the same amount that the beginning is lower than the average. This means the ending total assets are $1,050,000 to make the average $900,000.

Sales Are $2,700,000, Beginning Total Assets Are $750,000, and the Asset