In computing the return on average investment of a particular asset, the asset's annual depreciation expense may be viewed as: Multiple Choice A. An increase in the average amount invested over the life of the asset. B. An increase in the asset's carrying value each year. C. A recovery of the amount originally invested in the asset. D. A decrease in the asset's net cash flows.

Question

Easton Cobb

Business

12 August, 10:57

In computing the return on average investment of a particular asset, the asset's annual depreciation expense may be viewed as: Multiple Choice A. An increase in the average amount invested over the life of the asset. B. An increase in the asset's carrying value each year. C. A recovery of the amount originally invested in the asset. D. A decrease in the asset's net cash flows.

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Aditya Solomon · Answer 1

C. A recovery of the amount originally invested in the asset

Explanation:

The annual depreciation expense is a non-cash expense and shown in the debit side of the income statement plus it is get added in the net income in the operating activities section of the cash flow statement

While computing return on average investment, the annual depreciation expense recover the invested amount of the asset

Hence, all other options are wrong except c.