At the beginning of Year 1, the company buys box manufacturing equipment for $2,300. The estimated residual value is $100. The estimated useful life is 4 years. As shown below:

Straight line method

Straight line method	Beg Book value	Depreciation expense	Accumulated depreciation	Ending net book value
Yr 1	2300	(2300-100/4) = 550	550	1750
yr 2	1750	550	1100	1200
Yr 3	1200	550	1650	650
Yr 4	550	550	2200	100

Double decline method

Double decline method	Beg Book value	Depreciation expense	Accumulated depreciation	Ending net book value
Yr 1	2300	2300*50% = 1150	1150	1150
yr 2	1150	1150*50% = 575	1725	575
Yr 3	575	575*50% = 288	2013	287
Yr 4	287	187	2200	100

What Are the effects of deprecation methods above have on financial ratios shown below? Assume revenue is $5,000; operating income excluding deprecation is $3,00; and Property, Plant and Equipment (PPE) is the only total asset for the company.

Operating profit margin: Strait-line method. Accelerated method(Double Declining)

-Year 1

-Year 4

Return on Assets:

-Year 1

-Year 4

Asset turnover Ratio:   

-Year 1

-Year 4

Answer rating: 100% (QA)

To determine the effects of the depreciation methods on the financial ratios well calculate the values for each ratio using the given information and ... View the full answer