Kearin Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $8,000.The market price of common stock at the end of Year 2 was $2.02 per share. The company's return on total assets for Year 2 is closest to:

Question

Kearin Corporation has provided the following financial data:   Dividends on common stock during Year 2 totaled $8,000.The market price of common stock at the end of Year 2 was $2.02 per share. The company's return on total assets for Year 2 is closest to:

Quizplus · Accepted Answer

Return on total assets = Adjusted net income* ÷ Average total assets**
= $33,350 ÷ $1,530,000 = 2.18% (rounded)
*Adjusted net income = Net income + [Interest expense × (1 - Tax rate)]
= $21,000 + [$19,000 × (1 - 0.35)] = $33,350
**Average total assets = ($1,520,000 + $1,540,000)÷ 2 = $1,530,000

Kearin Corporation Has Provided the Following Financial Data