Question

Which of the following would be an argument for using the gross cost of plant and equipment as part of operating assets in return on investment computations? a. It is consistent with the conputation of net operating income, which includes depreciation as an operating expense.b. It is consistent with the balance sheet preventation of plant and equipment. c. It eliminates the age of equipment as afactor in ROI computations d. It discourages the replacement of old worn-out eqipmt because of the dramatic, advene effect on RO.

Answer 1

Answer:

Correct Answer:

a. It is consistent with the computation of net operating income, which includes depreciation as an operating expense.

Explanation:

The above option is the right answer due to fact that depreciation of the equipment  is an operating expenses. Therefore, the gross cost is used as part of operating assets during computation.