Question

During 2015, Rathke Corporation reported net sales of $3,000,000, net income of $1,200,000, and depreciation expense of $100,000. Rathke also reported beginning total assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and accumulated depreciation of $500,000. Rathke's asset turnover is

A) 3 times.
B) 2.4 times.
C) 2.0 times.
D) .96 times.

Answer 1

To calculate the asset turnover, we divide the net sales by the average total assets. The asset turnover for Rathke Corporation in 2015 is 2.4 times.

Step-by-step explanation:

To calculate the asset turnover, we can use the formula:

Asset Turnover = Net Sales / Average Total Assets

First, we need to calculate the average total assets:

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2

Substituting the given values, we get:

Average Total Assets = ($1,000,000 + $1,500,000) / 2 = $1,250,000

Next, we can calculate the asset turnover:

Asset Turnover = $3,000,000 / $1,250,000 = 2.4 times

Therefore, the correct answer is B) 2.4 times.