Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Calculating the Average Total Assets and the Return on Assets The income statement, statement of retained earnings, and balance sheet for Santiago Systems are as

Calculating the Average Total Assets and the Return on Assets

The income statement, statement of retained earnings, and balance sheet for Santiago Systems are as follows:

Santiago Systems Income Statement For the Year Ended December 31, 20X2
Amount Percent
Net sales $5,345,000 100.0%
Less: Cost of goods sold (3,474,250) 65.0
Gross margin $1,870,750 35.0
Less: Operating expenses (1,140,300) 21.3
Operating income $730,450 13.7
Less: Interest expense (27,000) 0.5
Income before taxes $703,450 13.2
Less: Income taxes (40%)* (281,380) 5.3
Net income $422,070 7.9
* Includes both state and federal taxes.

Santiago Systems Statement of Retained Earnings For the Year Ended December 31, 20X2
Balance, beginning of period $1,205,500
Net income 422,070
Total $1,627,570
Preferred dividends (40,000)
Dividends to common stockholders (150,000)
Balance, end of period $1,437,570

Santiago Systems Comparative Balance Sheets At December 31, 20X1 and 20X2
20X1 20X2
Assets
Current assets:
Cash $1,900,000 $2,100,000
Marketable securities 350,000 400,000
Accounts receivable (net) 625,000 675,000
Inventories 230,000 240,000
Other 50,000 50,000
Total current assets $3,155,000 $3,465,000
Property and equipment:
Land $900,000 $900,000
Building and equipment (net) 1,240,800 1,192,800
Total long-term assets $2,140,800 $2,092,800
Total assets $5,295,800 $5,557,800
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable, short term $247,300 $256,230
Accounts payable 240,000 250,000
Current maturity of long-term debt 3,000 4,000
Accrued payables 150,000 160,000
Total current liabilities $640,300 $670,230
Long-term liabilities:
Bonds payable, 9% 300,000 300,000
Total liabilities $940,300 $970,230
Stockholders' equity:
Preferred stock, $25 par, 8% $500,000 $500,000
Common stock, $1.00 par 150,000 150,000
Additional paid-in capital* 2,500,000 2,500,000
Retained earnings 1,205,500 1,437,570
Total stockholders' equity $4,355,500 $4,587,570
Total liabilities and stockholders' equity $5,295,800 $5,557,800
* For common stock only.

Assume a tax rate of 40%.

Required:

1. Calculate the average total assets.

2. Calculate the return on assets. Round your answer to two decimal places.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

ICSA Study Text In Management Accounting

Authors: Richard Lyall

4th Edition

186072308X, 978-1860723087

More Books

Students also viewed these Accounting questions

Question

2. What does the other person defi ne as the beginning?

Answered: 1 week ago

Question

1. What do you defi ne as the start of interaction?

Answered: 1 week ago