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2 November, 19:31

Jester Corporation's most recent income statement appears below: Income Statement Sales (all on account) $ 230,000 Cost of goods sold 135,000 Gross margin 95,000 Selling and administrative expense 43,000 Net operating income 52,000 Interest expense 13,000 Net income before taxes 39,000 Income taxes (30%) 11,700 Net income $ 27,300 The beginning balance of total assets was $170,000 and the ending balance was $167,400. The return on total assets is closest to

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  1. 2 November, 22:04
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    The return on total assets is closest to 21.57%

    Explanation:

    The formula to compute return on total assets is shown below:

    Return on total assets = Net income : Average total assets

    where,

    Net income = Net income + interest * (1 - tax rate)

    = $27,300 + 13,000 * (1 - 30%)

    = $27,300 + 9,100

    = $36,400

    And, average total assets = (Opening balance of total assets + Ending balance of total assets) : 2

    = ($170,000 + $167,400) : 2

    = $168,700

    Now put these values on the above formula.

    So, return on total assets is equals to

    = $36,400 : $168,700

    = 21.57%

    Hence, The return on total assets is closest to 21.57%
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