The total assets of the Philbin Company on January 1 were $2.3 million and on December 31 were $2.5 million.Net income for the year was $188,000.Dividends for the year were $75,000,interest expense was $70,000,and the tax rate was 30%.The return on total assets for the year was closest to which of the following?
A) 6.8%.
B) 9.5%.
C) 9.9%.
D) 10.8%.

Question

Quizplus · Accepted Answer

First, calculate the average total assets for the year:
($2.3M + $2.5M)/2 = $2.4M

Next, calculate the net income after taxes:
$188,000 - ($70,000 x 0.3) = $143,000

Then, calculate the return on total assets:
$143,000 / $2,400,000 = 0.0596

Convert to a percentage:
0.0596 x 100% = 5.96%

The closest answer choice is C) 9.9%.

The Total Assets of the Philbin Company on January 1