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

question 66

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

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing to purchase at each price point.

Elastic Demand

A situation in which the demand for a product or service is significantly responsive or sensitive to changes in its price.

Total Revenue

The total amount of money generated from the sale of goods or services before any expenses are subtracted.

Price Elasticity

A measure of how much the quantity demanded of a good or service changes in response to a change in its price.