Refer to the information presented in Mini-Exercise 6.3. Assume that Gandolfi Construction Co. calculated depreciation expense for

Question:

Refer to the information presented in Mini-Exercise 6.3. Assume that Gandolfi Construction Co. calculated depreciation expense for the CAT 336DL earth mover on the straight-line method and reported $480,000 of net income for the year ended December 31, 2013. The company’s average total assets for 2013 were $3,000,000.
In Mini-Exercise 6.3, Gandolfi Construction Co. purchased a used CAT 336DL earth mover at a cost of $325,000 in January 2013. The company’s estimated useful life of this heavy equipment is 10 years, and the estimated is $75,000.

Required:
a. Calculate Gandolfi’s ROI for the year ended December 31, 2013.
b. Calculate what Gandolfi’s ROI would have been for the year ended December 31, 2013, had the company used the double-declining-balance depreciation method for the CAT 336DL earth mover.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...