Question 1

Quantum Corp. has the following financial data for Year 1:
- Net income: $240,000
- Total assets (beginning): $1,800,000
- Total assets (ending): $2,200,000
- Total equity (beginning): $900,000
- Total equity (ending): $1,100,000

What is Quantum Corp.'s return on assets (ROA) for Year 1?

Accepted Answer

Calculate ROA as net income divided by average total assets. Average total assets = (beginning assets + ending assets) ÷ 2. Express as a percentage.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using beginning or ending assets instead of average assets, confusing ROA with ROE (return on equity), or forgetting to convert to percentage

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 2

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