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

question 84

Multiple Choice

The asset section of the January 1, 20X7 balance sheet of Murphy Company includes a machine, which was acquired on January 1, 20X1. The machine's original cost was $1,000,000, 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 amortization is $280,000, the rate of return on gross book value for 20X7 is

• A) 18 percent.
• B) 28 percent.
• C) 45 percent.
• D) 70 percent.

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