Organic Bagel Bakery (OBB) was started on January 1, 2005, when it acquired \($100,000\) cash from the issue of common stock. The company immediately purchased an oven that cost \($100,000\) cash. The oven had an estimated salvage value of \($10,000\) and an expected useful life of eight years. OBB used the oven during 2005 to produce \($30,000\) of cash revenue. Assume that these were the only events affecting OBB during 2005.

Required:

a. Compute the return on assets ratio as of December 31, 2005, assuming OBB uses the straight-line depreciation method.

b. Recompute the ratio assuming OBB uses the double-declining-balance method.

c. Which depreciation method makes it appear that OBB is utilizing its assets more effectively?