The Asset Section of the January 1, 20X7, Balance Sheet

question 160

Multiple Choice

The asset section of the January 1, 20X7, balance sheet of Petticoat Company includes a machine which was acquired on January 1, 20X3.The machine's original cost was $500,000, and the estimated life was determined to be 10 years.The estimated residual value was zero, and the straight-line method of depreciation was chosen.If operating income before depreciation is $90,000, the rate of return on average net book value for 20X7 is _____.

• A)14.55%
• B)13.33%
• C)16.00%
• D)32.79%

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Definitions:

Enforceability

The characteristic of a legal agreement or obligation that makes it legally binding and capable of being upheld or imposed in a court of law.

Reliance

The act of depending or trusting in something or someone, often involves confidence placed in a party during contractual agreements.

Specific Performance

A legal remedy in contract law requiring a party to execute the contract according to its exact terms rather than paying monetary damages.

Unique Items

Unique items refer to objects or assets that are distinct because of certain features or characteristics that set them apart from other items in a collection or category.