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MEGAFRAME COMPUTER COMPANY Balance Sheet as of 12/31/2006

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The Question is located in blue at the bottom of page 2
1.
MEGAFRAME COMPUTER COMPANY Balance Sheet as of 12/31/2006
Assets
Cash $40,000
Accounts Receivable 60,000
Inventory 90,000
New Plant and Equipment 220,000
Total Assets $410,000
LIABILITY AND STOCKHOLDERS' EQUITY
Accounts Payable $60,000
Accrued Expenses 40,000

Long-Term Debt 130,000
Common Stock 60,000
Paid-In capita 20,000
Retained Earnings 100,000
Total Liabilities and Stockholders' Equity $410,000
MEGAFRAME COMPUTER CO.
Income Statement For the Year Ended 12/31/2006
Sales (all on credit) $720,000
Cost of Goods Sold 500,000
Gross Profit $220,000
Sales and Administrative Expense 20,000
Depreciation 40,000
Operating Profit $160,000
Interest Expense 16,000
Profit before Taxes $144,000
Taxes (30%) 43,200
Net Income $100,800
3. Using the DuPont method, return on assets (investment) for Megaframe Computer is approximately what percentage? (Round to the nearest whole percent, and show your work/calculations/formulas.)

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Solution Summary

MEGAFRAME COMPUTER COMPANY Balance Sheet as of 12/31/2006
Assets
Cash $40,000
Accounts Receivable 60,000
Inventory 90,000
New Plant and Equipment 220,000
Total Assets $410,000
LIABILITY AND STOCKHOLDERS' EQUITY
Accounts Payable $60,000
Accrued Expenses 40,000

Long-Term Debt 130,000
Common Stock 60,000
Paid-In capita 20,000
Retained Earnings 100,000
Total Liabilities and Stockholders' Equity $410,000
MEGAFRAME COMPUTER CO.
Income Statement For the Year Ended 12/31/2006
Sales (all on credit) $720,000
Cost of Goods Sold 500,000
Gross Profit $220,000
Sales and Administrative Expense 20,000
Depreciation 40,000
Operating Profit $160,000
Interest Expense 16,000
Profit before Taxes $144,000
Taxes (30%) 43,200
Net Income $100,800
3. Using the DuPont method, return on assets (investment) for Megaframe Computer is approximately what percentage? (Round to the nearest whole percent, and show your work/calculations/formulas.)

$2.19