Question

The records of Marshall Company include the following: Average total assets $3,850,000 Average total liabilities 1,570,000 Total revenue 4,930,000 Total expense (including income tax) 4,030,000 Interest expense (included in total expenses) 97,000 Income tax rate 35% The return on assets is closest to:

o 57.32%.
o 42.24%.
o 23.38%.
o 25.01%.

Answer 1

The return on assets is 7.08%.

Step-by-step explanation:

To calculate the return on assets, we need to use the following formula:
Return on Assets = (Net Income + Interest Expense) / Average Total Assets
First, let's calculate the net income:
Net Income = Total Revenue - Total Expense - Income Tax
Net Income = $4,930,000 - $4,030,000 - ($4,930,000 * 0.35)
Net Income = $4,930,000 - $4,030,000 - $1,724,500
Net Income = $175,500
Next, we can calculate the return on assets:
Return on Assets = ($175,500 + $97,000) / $3,850,000
Return on Assets = $272,500 / $3,850,000
Return on Assets = 0.07078
Finally, we can convert the decimal to a percentage:
Return on Assets = 0.07078 * 100
Return on Assets = 7.08%