East Point Retail, Inc., sells apparel through company-owned retail stores. Financial information for East Point follows (in thousands): Line Item Description Fiscal Year 3 Fiscal Year 2 Net income $143,300 $73,800 Interest expense 2,900 11,000 Line Item Description Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $3,058,265 $2,909,081 $2,561,887 Total stockholders' equity (at end of fiscal year) 1,104,832 1,082,954 785,400 Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders’ equity is 15.0% for the year ended April 2, Year 3. a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round your answers to one decimal place. Line Item Description Percentage Fiscal Year 3 fill in the blank 1 % Fiscal Year 2 fill in the blank 2 % b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round your answers to one decimal place. Line Item Description Percentage Fiscal Year 3 fill in the blank 3 % Fiscal Year 2 fill in the blank 4 % c. The return on stockholders' equity is the return on total assets due to the use of leverage. d. During fiscal Year 3, East Point’s results were fill in the blank 1 of 4 compared to the industry average. The return on total assets for East Point was fill in the blank 2 of 4 than the industry average. The return on stockholders’ equity was fill in the blank 3 of 4 than the industry average. These relationships suggest that East Point has fill in the blank 4 of 4

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter1: Introduction To Accounting And Business

Section: Chapter Questions

Problem 26E

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East Point Retail, Inc., sells apparel through company-owned retail stores. Financial information for East Point follows (in thousands):

Line Item Description	Fiscal Year 3	Fiscal Year 2
Net income	$143,300	$73,800
Interest expense	2,900	11,000

Line Item Description	Fiscal Year 3	Fiscal Year 2	Fiscal Year 1
Total assets (at end of fiscal year)	$3,058,265	$2,909,081	$2,561,887
Total stockholders' equity (at end of fiscal year)	1,104,832	1,082,954	785,400

Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders’ equity is 15.0% for the year ended April 2, Year 3.

a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round your answers to one decimal place.

Line Item Description	Percentage
Fiscal Year 3	fill in the blank 1 %
Fiscal Year 2	fill in the blank 2 %

b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round your answers to one decimal place.

Line Item Description	Percentage
Fiscal Year 3	fill in the blank 3 %
Fiscal Year 2	fill in the blank 4 %

c. The return on stockholders' equity is

the return on total assets due to the

use of leverage.

d. During fiscal Year 3, East Point’s results were fill in the blank 1 of 4

compared to the industry average. The return on total assets for East Point was fill in the blank 2 of 4

than the industry average. The return on stockholders’ equity was fill in the blank 3 of 4

than the industry average. These relationships suggest that East Point has fill in the blank 4 of 4

leverage than the industry, on average.

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