The records of Marshall Company include the following: $$\begin{array} { l r }
\text { Average total assets } & \$ 3,500,000 \
\text { Average total liabilities } & 1,220,000 \
\text { Total revenue } & 4,580,000 \
\text { Total expense (including income tax) } & 4,100,000 \
\text { Interest expense (included in total expenses) } & 90,000 \
\text { Income tax rate } 40 \% &
\end{array}$$ The return on equity is (round to the nearest tenth of a percent)
A)21.1%.
B)10.2%.
C)16.4%.
D)17.1%.

Question

The records of Marshall Company include the following: $$\begin{array} { l r } 
\text { Average total assets } & \$ 3,500,000 \
\text { Average total liabilities } & 1,220,000 \
\text { Total revenue } & 4,580,000 \
\text { Total expense (including income tax) } & 4,100,000 \
\text { Interest expense (included in total expenses) } & 90,000 \
\text { Income tax rate } 40 \% &
\end{array}$$ The return on equity is (round to the nearest tenth of a percent)
A)21.1%.
B)10.2%.
C)16.4%.
D)17.1%.

Quizplus · Accepted Answer

Return on equity = (Net income / Average total equity) * 100Net income = Total revenue - Total expenseTotal expense = Total expense (including income tax) - Interest expenseInterest expense = 90,000Total expense (including income tax) = 4,100,000Total revenue = 4,580,000Average total equity = Average total assets - Average total liabilitiesAverage total assets = 3,500,000Average total liabilities = 1,220,000Net income = 4,580,000 - (4,100,000 - 90,000) = 570,000Average total equity = 3,500,000 - 1,220,000 = 2,280,000Return on equity = (570,000 / 2,280,000) * 100 = 21.1%

The Records of Marshall Company Include the Following The Return on Equity Is (Round to the Nearest Tenth