Financial statements for Larned Company appear below: Dividends during Year 2 totaled $263 thousand, of which $12 thousand were preferred dividends.
The market price of a share of common stock on December 31, Year 2 was $160.

-Larned Company's return on total assets for Year 2 was closest to:
A)15.8%
B)17.2%
C)18.6%
D)17.8%

Question

Financial statements for Larned Company appear below:   Dividends during Year 2 totaled $263 thousand, of which $12 thousand were preferred dividends.
The market price of a share of common stock on December 31, Year 2 was $160.
 
-Larned Company's return on total assets for Year 2 was closest to:
A)15.8% 
B)17.2% 
C)18.6% 
D)17.8%

Quizplus · Accepted Answer

Adjusted net income = Net income + [Interest expense F1F1F1S1F1F1F10 (1-Tax rate)]
= $343 + [$40 F1F1F1S1F1F1F10 (1 - 0.30)] = $371
Average total assets = ($2,040 + $1,950)F1F1F1S1F1F1F10 2 = $1,995
Return on total assets = Adjusted net income F1F1F1S1F1F1F10 Average total assets
= $371 F1F1F1S1F1F1F10 $1,995 = 18.6%

Financial Statements for Larned Company Appear Below: Dividends