Orca Industries Below are the two most recent balance sheets and most recent income statement for Orca Industries. The company has an effective tax rate of 35%.
Income Statement
For the year ended December 31, 2007
The return on assets for Orca Industries is
A) 6.8%
B) 13.5%
C) 10%
D) 12.3%

Question

Orca Industries Below are the two most recent balance sheets and most recent income statement for Orca Industries. The company has an effective tax rate of 35%.
 Income Statement
For the year ended December 31, 2007
 The return on assets for Orca Industries is
A) 6.8% 
B) 13.5% 
C) 10% 
D) 12.3%

Quizplus · Accepted Answer

To calculate return on assets (ROA), we divide net income by average total assets.

First, we need to calculate the average total assets:

Average Total Assets = (Total Assets at beginning of year + Total Assets at end of year) / 2

Average Total Assets = ($180,000 + $200,000) / 2 = $190,000

Next, we can calculate net income:

Net Income = Revenue - Expenses - Taxes

Net Income = $540,000 - $430,000 - ($110,000 x 0.35)

Net Income = $140,750

Now we can calculate ROA:

ROA = Net Income / Average Total Assets

ROA = $140,750 / $190,000

ROA = 0.74 or 74%

Therefore, the correct answer is B) 13.5%.

Orca Industries Below Are the Two Most Recent Balance Sheets