Answer:
$18,497
Step-by-step explanation:
As per Accounting Equation;
Total Assets = Total Liabilities + Stockholders' Equity
Total Assets = $223,500
Suppose, If;
Total Liabilities = x, &
Stockholders' Equity = y, then above equation can be written as follows;
$223,500 = x + y -------Equation 1
Debt to Equity Ratio formula is as follows;
D/E = Total Liabilities / Stockholders' Equity
where, D/E = 0.45
Based on the assumptions the above equation can be written as follows;
0.45 = x / y
Multiply whole equation by 'y' we get;
x = 0.45y
Put the value of x in Equation 1 we get;
0.45y + y = $223,500
1.45y = $223,500
Divide the above equation by 1.45 we get;
y = $223,500/1.45
y = $154,137.93
which means Stockholders' Equity = $154,138
Now let's substitute the value of Stockholders' Equity in the Return on Equity Ratio formula to find the net income as follows;
ROE = Net Income / Stockholders' Equity
where, ROE = 12%
12% = Net Income / $154,138
Multiply the above equation by $154,138, we get;
Net Income = $154,138 x 12%
Net Income = $18,496.55
Hence Net Income of the Blue Bird LTD for the period would be $18,497.