Gandolfi Construction Co. purchased a CAT 336DL earth mover at a cost of $1,000,000 in January...

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Gandolfi Construction Co. purchased a CAT 336DL earth mover at a cost of $1,000,000 in January 2019. The companys estimated b. Calculate what Gandolfis ROI would have been for the year ended December 31, 2019, had the company used the double- decli

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Answer 1

Answer #1

(a)

Return on Investment for the year ended December 31, 2019
Choose Numerator	/	Choose Denominator	=	ROI
Net Income	/	Average Total Assets	=	ROI
$960000	/	$8000000	=	12%

(b)

Return on Investment for the year ended December 31, 2019
Choose Numerator	/	Choose Denominator	=	ROI
Net Income	/	Average Total Assets	=	ROI
$810000	/	$7925000	=	10.2%

Net Income = $960000 + Depreciation under SLM – Depreciation under Double declining balance

Depreciation under SLM = ($1000000 - $200000)/8years = $100000

Depreciation under Double declining balance:-

Rate = (1/8 years)* 2 = 25%

$1000000 * 25% = $250000

Net Income = $960000 + $100000 – $250000 = $810000

Average Total Asset = $8000000 – [($250000 - $100000)/2] = $7925000

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Answer 2

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Gandolfi Construction Co. purchased a CAT 336DL earth mover at a cost of $1,000,000 in January...

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