Year 2016 2017 2018 2019 2020 2021 2022 Index 82 84 89 94 96 100 Cost $ 1,000,000 1,000,000 1,100,000 1,150,000 1,200,000 1,250,000 1,300,000 Health Care $ 800,000 800,000 600,000 600,000 700,000 700,000 600,000 Cosmetics $ 800,000 800,000 600,000 700,000 800,000 800,000 900,000 Required: (Round your answers to 2 decimal places.) 1. Compute return on investment (ROI) for each division using the historical cost of divisional assets (including current assets) as the investment base. 2. Compute ROI for each division, incorporating current-cost estimates as follows: a. Gross book value (GBV) of long-lived assets plus book value of current assets. b. GBV of long-lived assets restated to current cost using the index of construction costs plus book value of current assets. (Do not round intermediate calculations. Round dollar values to the nearest whole dollar.) c. Net book value (NBV) of long-lived assets restated to current cost using the index of construction costs plus book value of current assets. (Do not round intermediate calculations. Round dollar values to the nearest whole dollar.) d. Current replacement cost of long-lived assets plus book value of current assets. e. Current liquidation value of long-lived assets plus book value of current assets. 1. Return on investment based on historical cost of divisional assets 2a. Return on investment based on gross book value 2b Return on investment based on gross book value at current cost 2c. Return on investment based on net book value at current cost 2d. Return on investment based on current replacement cost 2e. Return on investment based on current liquidation value Health Care % % % % % Cosmetics % % % % % %

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Year
2016
2017
2018
2019
2020
2021
2022
Index
82
84
89
94
96
100
Cost
$ 1,000,000
1,000,000
1,100,000
1,150,000
1,200,000
1,250,000
1,300,000
Health Care
$ 800,000
800,000
600,000
600,000
700,000
700,000
600,000
Cosmetics
$ 800,000
800,000
600,000
700,000
800,000
800,000
900,000
Required:
(Round your answers to 2 decimal places.)
1. Compute return on investment (ROI) for each division using the historical cost of divisional assets (including current assets) as the
investment base.
2. Compute ROI for each division, incorporating current-cost estimates as follows:
a. Gross book value (GBV) of long-lived assets plus book value of current assets.
b. GBV of long-lived assets restated to current cost using the index of construction costs plus book value of current assets. (Do not
round intermediate calculations. Round dollar values to the nearest whole dollar.)
c. Net book value (NBV) of long-lived assets restated to current cost using the index of construction costs plus book value of current
assets. (Do not round intermediate calculations. Round dollar values to the nearest whole dollar.)
d. Current replacement cost of long-lived assets plus book value of current assets.
e. Current liquidation value of long-lived assets plus book value of current assets.
1.
Return on investment based on historical cost of divisional assets
2a.
Return on investment based on gross book value
2b
Return on investment based on gross book value at current cost
2c. Return on investment based on net book value at current cost
2d. Return on investment based on current replacement cost
2e. Return on investment based on current liquidation value
Health Care
%
%
%
%
%
%
Cosmetics
%
%
%
%
%
%
Transcribed Image Text:Year 2016 2017 2018 2019 2020 2021 2022 Index 82 84 89 94 96 100 Cost $ 1,000,000 1,000,000 1,100,000 1,150,000 1,200,000 1,250,000 1,300,000 Health Care $ 800,000 800,000 600,000 600,000 700,000 700,000 600,000 Cosmetics $ 800,000 800,000 600,000 700,000 800,000 800,000 900,000 Required: (Round your answers to 2 decimal places.) 1. Compute return on investment (ROI) for each division using the historical cost of divisional assets (including current assets) as the investment base. 2. Compute ROI for each division, incorporating current-cost estimates as follows: a. Gross book value (GBV) of long-lived assets plus book value of current assets. b. GBV of long-lived assets restated to current cost using the index of construction costs plus book value of current assets. (Do not round intermediate calculations. Round dollar values to the nearest whole dollar.) c. Net book value (NBV) of long-lived assets restated to current cost using the index of construction costs plus book value of current assets. (Do not round intermediate calculations. Round dollar values to the nearest whole dollar.) d. Current replacement cost of long-lived assets plus book value of current assets. e. Current liquidation value of long-lived assets plus book value of current assets. 1. Return on investment based on historical cost of divisional assets 2a. Return on investment based on gross book value 2b Return on investment based on gross book value at current cost 2c. Return on investment based on net book value at current cost 2d. Return on investment based on current replacement cost 2e. Return on investment based on current liquidation value Health Care % % % % % % Cosmetics % % % % % %
Ready Products Incorporated operates two divisions, each with its own manufacturing facility. The accounting system reports the
following data for 2022:
HEALTH CARE PRODUCTS DIVISION
Income Statement
For the Year Ended December 31, 2022
Revenues
Operating costs
Operating income
$ 1,200
770
$ 430
COSMETICS DIVISION
Income Statement
For the Year Ended December 31, 2022
Revenues
Operating costs
Operating income
$ 960
460
$ 500
Ready estimates the useful life of each manufacturing facility to be 21 years. As of the end of 2022, the plant for the health care
division is 4 years old, while the manufacturing plant for the cosmetics division is 6 years old. Each plant had the same cost at the time
of purchase, and both have useful lives of 21 years with no salvage value. The company uses straight-line depreciation and the
depreciation charge is $70,000 per year for each division. The manufacturing facility is the only long-lived asset of either division.
Current assets are $312,000 in each division.
An index of construction costs, replacement costs, and liquidation values for the manufacturing facilities for the period that Ready has
been operating is as follows:
Transcribed Image Text:Ready Products Incorporated operates two divisions, each with its own manufacturing facility. The accounting system reports the following data for 2022: HEALTH CARE PRODUCTS DIVISION Income Statement For the Year Ended December 31, 2022 Revenues Operating costs Operating income $ 1,200 770 $ 430 COSMETICS DIVISION Income Statement For the Year Ended December 31, 2022 Revenues Operating costs Operating income $ 960 460 $ 500 Ready estimates the useful life of each manufacturing facility to be 21 years. As of the end of 2022, the plant for the health care division is 4 years old, while the manufacturing plant for the cosmetics division is 6 years old. Each plant had the same cost at the time of purchase, and both have useful lives of 21 years with no salvage value. The company uses straight-line depreciation and the depreciation charge is $70,000 per year for each division. The manufacturing facility is the only long-lived asset of either division. Current assets are $312,000 in each division. An index of construction costs, replacement costs, and liquidation values for the manufacturing facilities for the period that Ready has been operating is as follows:
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 7 images

Blurred answer
Knowledge Booster
Annuity
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education