Refer to the information for Somerville Company below. Assume a tax rate of 40%.
Information for Somerville Company

Required:
Round answers to two decimal places.
1. Calculate the average total assets.
2. Calculate the return on assets.

Transcribed Image Text:

Somerville Company Income Statement For the Year Ended December 31, 2012 Amount Percent Net sales Less: Cost of goods sold 8,281,989 5,383,293 2,898,696 1,323,368 Less: Operating expenses Less: Interest expense Less: Income taxes (40%) Gross margin Operating income Income before taxes Net income 100.0% 65.0 35.0 16.0 19.0 0.6 18.4 7.4 11.0 50,000 10,131 915,197 Includes both stale and federal la xes Includes both stale and federal la xes Somervile Company Statement of Retained Eamings For the Year Ended December 31, 2012 Balance, beginning of period Net income $1,979,155 915,197 2,894,352 80,000) 01,88 2,612,465 Total Less: Preferred dividends Dividends to common stockholders Balance, end of period Somervile Company Comparative Balance Sheets At December 31, 2011 and 2012 2011 2012 Assets Current assets $2,875,000 800,000 939 776 490,000 93,000 $5,197776 $2,580,000 700,000 690,000 260,000 74,261 as Marketable securities Accounts receivable (net) Inventories Other Total current assets $1,575,000 1,348,800 2,23,00 $1,067,315 1,150,000 $ 21715 $6,521,576 Land Building and equipment (net) Total long-term assets Total assets S11/ Liabilities and Stockholders' Equity Current liabilities: Notes payable, short term Accounts payable Current maturity of long-term debt Accrued payables $1,170,127 298484 3,000 200,000 $543,641 101,500 ,0x) 57,780 $ 704,921 Total current liabilities $1,671,61 Bonds payable, 10% 500,000 $7,1/161T 500,000 Total liabilities Stodkholders'equity Preferred stock, $25-par, 8% Common stock, $1.50 par Additional paid-in capital Retained eamings $1,000,000 337,500 2,000,000 2,612,465 $5,949,965 $1,000,000 337,500 2,000,000 1,979,155 A5,os $6,521,576 Total stockholders equity Total liabilities and stockholders equity For common stock only.