You are the new human resources manager and are reviewing the bonus policies as part of familiarizing yourself with the payroll system. The plant superintendent’s bonus is calculated as the return on total assets ratio for the year times one month’s salary. You have the information below and, recalling some basic accounting that you took while attending a post-secondary educational institution, you make a note to ask why double-declining balance depreciation is not being used given the nature of the plant assets. Also, in speaking with one of the plant foremen, you discover that the useful life of this type of machinery is typically 12 years and its residual value is $100,000.
* No plant assets have been purchased or sold since January 1, 2011; original cost $980,000; depreciation is calculated using straight-line; useful life 20 years; residual value $250,000. Required Using the elements of critical thinking described on the inside front cover,comment.