The Jones Company purchased assets costing $200,000 which will be depreciated over 5-years using straight-line depreciation and no salvage value.The 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.What is the ROI for each year using net book value? $$\begin{array} { | l | c | c | c | c | }
\hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \
\hline \text { A. } & 11.1 \% & 12.5 \% & 14.3 \% & 16.7 \% \
\hline \text { B. } & 10.0 \% & 10.0 \% & 10.0 \% & 10.0 \% \
\hline \text { C. } & 10.0 \% & 8.9 \% & 7.3 \% & 6.5 \% \
\hline \text { D. } & 11.1 \% & 11.5 \% & 12.5 \% & 12.3 \% \
\hline
\end{array}$$

Question

The Jones Company purchased assets costing $200,000 which will be depreciated over 5-years using straight-line depreciation and no salvage value.The 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.What is the ROI for each year using net book value? $$\begin{array} { | l | c | c | c | c | } 
\hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \
\hline \text { A. } & 11.1 \% & 12.5 \% & 14.3 \% & 16.7 \% \
\hline \text { B. } & 10.0 \% & 10.0 \% & 10.0 \% & 10.0 \% \
\hline \text { C. } & 10.0 \% & 8.9 \% & 7.3 \% & 6.5 \% \
\hline \text { D. } & 11.1 \% & 11.5 \% & 12.5 \% & 12.3 \% \
\hline
\end{array}$$

Quizplus · Accepted Answer

The ROI is calculated using the formula: ROI = (Annual Cash Profits / Net Book Value of Assets) * 100. The depreciable assets decrease by $40,000 each year due to straight-line depreciation. The net book value at the end of each year is: Year 1: $360,000, Year 2: $320,000, Year 3: $280,000, Year 4: $240,000. The ROI for each year is: Year 1: (80,000/360,000)*100 = 22.2%, Year 2: (80,000/320,000)*100 = 25%, Year 3: (80,000/280,000)*100 = 28.6%, Year 4: (80,000/240,000)*100 = 33.3%. However, the closest match to the given options is Option A.

The Jones Company Purchased Assets Costing $200,000 Which Will Be