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

Multiple Choice

The Jones Company purchased assets costing $200,000 which will be depreciated over 5 years using straight-line depreciation and no salvage value. 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.
If sales each year average $840,000, what will be the asset turnover using gross book value?

A) 3.0.
B) 2.6.
C) 2.1.
D) 1.9.