Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher

Exercise 24

Compare Current Cost to Historical Cost
Refer to the information in Exercise 14-26. In computing ROI, this division uses end-of-year asset values. Assume that all cash flows increase 10 percent at the end of each year. This has the following effect on the assets' replacement cost and annual cash flows:

Depreciation is as follows:

Note that "accumulated" depreciation is 10 percent of the gross book value of depreciable assets after one year, 20 percent after two years, and so forth.
Required
a. Compute ROI using historical cost, net book value.
b. Compute ROI using historical cost, gross book value.
c. Compute ROI using current cost, net book value.
d. Compute ROI using current cost, gross book value.