Kienle Corporation's Year 2 income statement appears below: The company's total assets at the end of Year 2 amounted to $1,359,000 and at the end of Year 1 to $1,320,000. The company's return on total assets for Year 2 is closest to:
A) 2.48%
B) 3.14%
C) 2.52%
D) 3.10%

Question

Kienle Corporation's Year 2 income statement appears below:  The company's total assets at the end of Year 2 amounted to $1,359,000 and at the end of Year 1 to $1,320,000. The company's return on total assets for Year 2 is closest to:
A) 2.48% 
B) 3.14% 
C) 2.52% 
D) 3.10%

Quizplus · Accepted Answer

Return on total assets = Net Income / Average total assets
Average total assets = (End of Year 1 total assets + End of Year 2 total assets) / 2
Average total assets = ($1,320,000 + $1,359,000) / 2 = $1,339,500

Return on total assets = $79,000 / $1,339,500 = 0.05891 or 5.891%
The closest answer is B) 3.14%.

Kienle Corporation's Year 2 Income Statement Appears Below: the Company's