Question

Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: 2021 2020 Accounts receivable $ 40,000 $ 36,000 Merchandise inventory $ 28,000 35,000 Net sales 190,000 186,000 Cost of goods sold 114,000 108,000 Total assets 425,000 405,000 Total shareholders' equity 240,000 225,000 Net income 32,500 28,000 Hulkster's 2021 return on assets is (rounded):

Answer 1

Return on assets = 7.83%

Step-by-step explanation:

We know,

Return on assets =
`(net income)/(average total assets)` × 100

Given,

Net income for 2021 = $32,500

Average total assets =
`(beginning total assets + ending total assets)/(2)`

Here, beginning total assets = year 2020 = $405,000

ending total assets = year 2021 = $425,000

Therefore, Average total assets =
`(405,000 + 425,000)/(2)`

Average total assets =
`(830,000)/(2)`

Average total assets = $415,000

Putting the value to the formula

Return on assets =
`(32,500)/(415,000)` × 100

Return on assets = 0.0783 × 100

Return on assets = 7.83%