Jester Corporation's most recent income statement appears below:
The beginning balance of total assets was $360,000 and the ending balance was $320,000.The return on total assets is closest to:
A) 26.5%
B) 18.5%
C) 22.6%
D) 32.4%

Question

Jester Corporation's most recent income statement appears below:
 The beginning balance of total assets was $360,000 and the ending balance was $320,000.The return on total assets is closest to:
A) 26.5% 
B) 18.5% 
C) 22.6% 
D) 32.4%

Quizplus · Accepted Answer

Adjusted net income = Net income + [Interest expense × (1 - Tax rate)]
= $63,000 + [$20,000 × (1 - 0.30)] = $77,000
Average total assets = ($360,000 + $320,000) ÷ 2 = $340,000
Return on total assets = Adjusted net income ÷ Average total assets
= $77,000 ÷ $340,000 = 22.6% (rounded)

Jester Corporation's Most Recent Income Statement Appears Below