Net sales are $2,700,000, beginning total assets are $700,000, and the asset turnover is 3.0. What is the ending total asset balance?
A) $900,000
B) $1,100,000
C) $700,000
D) $800,000

Question

Quizplus · Accepted Answer

Asset turnover is calculated as: Net sales / Average total assets.

We have:
Net sales = $2,700,000
Asset turnover = 3.0

Thus, we can rearrange the formula to solve for the average total assets:

Average total assets = Net sales / Asset turnover
= $2,700,000 / 3.0
= $900,000

The beginning total assets are given as $700,000. Therefore, the ending total asset balance can be calculated by adding the increase in total assets to the beginning balance:

Ending total asset balance = Beginning total assets + Increase in total assets.

The increase in total assets can be found by subtracting the beginning total assets from the average total assets:

Increase in total assets = Average total assets - Beginning total assets
= $900,000 - $700,000
= $200,000

Finally, the ending total asset balance is:

Ending total asset balance = Beginning total assets + Increase in total assets
= $700,000 + $200,000
= $1,100,000

Therefore, the correct answer is B ($1,100,000).

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