Net sales are $6,000,000, beginning total assets are $2,800,000, and the asset turnover is 2.0 times. What is the ending total asset balance?

Question

Quizplus · Accepted Answer

Asset turnover is calculated as net sales divided by average total assets. We are given net sales and the asset turnover, so we can solve for average total assets:

2.0 = $6,000,000 / Average Total Assets

Average Total Assets = $3,000,000

Since we are given the beginning total asset balance of $2,800,000, we can calculate the ending total asset balance by adding the change in assets:

Ending Total Asset Balance = Beginning Total Asset Balance + Change in Assets

Ending Total Asset Balance = $2,800,000 + ($3,000,000 - $2,800,000)

Ending Total Asset Balance = $3,200,000

Therefore, the best choice is B.

Net Sales Are $6,000,000, Beginning Total Assets Are $2,800,000, and the Asset