The Jones Company Purchased Assets Costing $200,000 Which Will Be $\begin{array} { r r r r r } & \text { Year } 1 & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\end{array}$

question 132

Multiple Choice

The Jones Company purchased assets costing $200,000 which will be depreciated over 5 years using straight-line depreciation and no salvage value. Jones also purchased land and other assets, which are not depreciable, at a cost of $200,000. It is estimated that in 5 years, the value of these assets will be unchanged. Assume that annual cash profits are $80,000 and, for return on investment (ROI) calculations, the company uses end-of-year asset values.
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What is the ROI for each year using gross book value?
$\begin{array} { r r r r r } & \text { Year } 1 & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\end{array}$
A) $\begin{array} { r r r r r } & 10.0 \% & 9.5 \% &&& 8.0 \% & 7.9 \% \\\end{array}$
B) $\begin{array} { r r r r r } & 10.0 \% & 10.0 \% && 10.0 \% & 10.0 \% \\\end{array}$
C) $\begin{array} { r r r r r } & 12.5 \% & 11.0 \% && 12.0 \% & 15.0 \% \\\end{array}$
D) $\begin{array} { r r r r r } & 10.0 \% & 12.5 \% && 14.0 \% & 17.0 \%\end{array}$

• A) \(\begin{array} { r r r r r } & 10.0 \% & 9.5 \% &&& 8.0 \% & 7.9 \% \\\end{array}\)
• B) \(\begin{array} { r r r r r } & 10.0 \% & 10.0 \% && 10.0 \% & 10.0 \% \\\end{array}\)
• C)\(\begin{array} { r r r r r } & 12.5 \% & 11.0 \% && 12.0 \% & 15.0 \% \\\end{array}\)
• D)\(\begin{array} { r r r r r } & 10.0 \% & 12.5 \% && 14.0 \% & 17.0 \%
• \end{array}\)
• A) Option A
• B) Option B
• C) Option C
• D) Option D

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Definitions:

Purchase Price

The purchase price is the amount of money paid to buy an asset, product, or service.

Ethically

Acting in ways considered morally right and professionally appropriate according to standards of conduct.

Consequences

The results or effects that stem from specific actions, decisions, or policies, which can be positive, negative, or neutral.

Personal Standards

Individual beliefs and values that guide behavior and decisions, often reflecting what one considers important or acceptable.