The Holmes Division recorded operating data as follows for the past year:
-For the past year, the return on investment was:
A) 15.75%
B) 20.50%
C) 25.00%
D) 31.25%

Question

The Holmes Division recorded operating data as follows for the past year: 
-For the past year, the return on investment was:
A) 15.75% 
B) 20.50% 
C) 25.00% 
D) 31.25%

Quizplus · Accepted Answer

To calculate the return on investment, divide the net income by the average investment. 
The net income for the year is $35,000 ($135,000 sales revenue - $50,000 expenses - $50,000 depreciation). 
The average investment is ($140,000 beginning of year investment + $160,000 end of year investment) / 2 = $150,000. 
Return on investment = $35,000 / $150,000 = 0.2333 or 23.33%. 
Therefore, the closest option is C) 25.00%.

The Holmes Division Recorded Operating Data as Follows for the Past