Johnson & Johnson Income Statement for the Year Ended December 31, Year 10

• Sales revenue: $1,500,000
• Cost of goods sold: $1,000,000
• Gross margin: $500,000
• Operating expenses:
  • Selling expenses: $100,000
  • Depreciation expenses: $90,000
• Operating income: $310,000
• Nonoperating items: $50,000
• Net income: $260,000

Balance Sheet as of December 31, Year 10

• Assets:
  • Cash: $150,000
  • Accounts receivable: $300,000
  • Merchandise inventory: $250,000
  • Equipment (less accumulated depreciation): $400,000
  • Nonoperating assets: $350,000
• Total assets: $1,450,000
• Liabilities:
  • Accounts payable: $100,000
  • Notes payable: $90,000
  • Stockholders' equity: $1,260,000
• Total liabilities and stockholders' equity: $1,450,000

Required:

a. Calculate the gross margin percentage. b. Calculate the operating margin percentage. c. Calculate the return on assets (ROA). d. Calculate the return on equity (ROE). e. Johnson & Johnson is considering a merger with another company. If the merger will cost $500,000 but is expected to increase net income by $120,000, calculate the new ROA and ROE.