The Northern Division of the Gordon Company Reported the Following

question 159

Multiple Choice

The Northern Division of the Gordon Company reported the following data for last year:
$\begin{array}{|r|r|}\hline \text { Sales } & \$ 900,000 \\\hline \text { Shareholders' Equity } & \$ 320,000 \\\hline \text { Operating Expenses } & \$ 700,000 \\\hline \text { Average Operating Assets } & \$ 500,000 \\\hline \text { Interest Expense } & \$ 50,000 \\\hline \text { Tax Expense } & \$ 60,000 \\\hline \text { Minimum Required Rate of Return } & 15 \% \\\hline\end{array}$



-What was the return on investment last year for the Northern Division?

• A) 18.000%.
• B) 28.125%.
• C) 40.000%.
• D) 62.500%.

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Definitions:

Liabilities

Present obligations of an entity arising from past transactions or events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

Sale Of Goods

A transaction between two parties where the seller transfers the ownership of goods to the buyer for a price.

Fair Value

An estimate of the price at which an asset or liability could be exchanged between knowledgeable, willing parties in an arm's length transaction.