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 = Adjusted net income* ÷ Average total assets**
= $42,100 ÷ $1,339,500 = 3.14% (rounded)
*Adjusted net income = Net income + [Interest expense × (1 - Tax rate)]
= $33,700 + [$12,000 × (1 - 0.30)] = $42,100
**Average total assets = ($1,359,000 + $1,320,000)÷ 2 = $1,339,500

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