Use This Balance Sheet and Income Statement for the First

question 31

Multiple Choice

Use this balance sheet and income statement for the first year of operations for Layton Novelties,Inc.to answer the following question.Use ending balances whenever average balances are required for computing ratios. $\begin{array}{c}\text {Abner Systems, Inc.}\\\text {Income Statement}\\\text {For the Year Ended December 31, 2010}\\\begin{array}{lr}\text { Net sales } & \$ 80,000 \\\text { Costs of goods sold } & \underline{32,000} \\\text { Gross margin } & \$ 48,000 \\\text { Operating expenses } & \underline{12,000}\\\text { Income before income taxes }&\$36,000 \\\text { Income taxes }& \underline{14,400}\\ \text {Net income } & \$21,600 \end{array}\end{array}$
The return on assets for Layton Novelties is

• A) 40 percent.
• B) 70 percent.
• C) 18 percent.
• D) 66-2/3 percent.

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Definitions:

Abreaction

A therapeutic process in which repressed emotions are brought to consciousness and expressed.

Compromise

A method of resolving disagreements where each party makes concessions to reach a mutually acceptable solution.

Withdrawal

The process of reducing or eliminating the intake of addictive substances, often leading to physical and psychological symptoms.

Confrontation

A direct encounter between parties or individuals where conflicts or disagreements are openly addressed.