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:

Square Footages

A measurement of area used to determine the size of a space, often used in real estate and construction for billing or planning purposes.

Allocated

The process of distributing resources or costs among different departments, activities, or products.

Indirect Expense

Costs that are not directly linked to the production of goods or services but are necessary for the business's day-to-day operations, such as utilities and rent.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, recognizing it as an expense.