The balance sheet of Sub America reports total assets of $400,000 and $450,000 at the beginning and end of the year,respectively.The return on assets for the year is 10%.What is Sub America's net income for the year?

Question

Quizplus · Accepted Answer

The return on assets (ROA) is calculated as Net Income divided by Average Total Assets. The average total assets for the year is ($400,000 + $450,000) / 2 = $425,000. With a ROA of 10%, the net income is 10% of $425,000, which equals $42,500.

The Balance Sheet of Sub America Reports Total Assets of $400,000