AICPA Exam CPA-Business Topic 1 Question 84 Discussion

Actual exam question for AICPA's CPA Business Environment and Concepts exam

Question #: 84
Topic #: 1

[All CPA Business Environment and Concepts Questions]

The following information pertains to Quest Co.'s Gold Division for 1993:

Quest's return on investment was:

A10.00 percent.

B13.33 percent.

C27.50 percent.

D30.00 percent.

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. Return on investment equals net income divided by average invested capital:

Choices 'a', 'b', and 'd' are incorrect, per the above calculation.

by Cecilia at Apr 10, 2024, 06:17 AM

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Precious

12 days ago

I think the return on investment was 27.50 percent

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Blair

1 months ago

Ugh, I hate these ROI questions. Why can't they just ask something straightforward, like 'what's the square root of 144?' *sighs* Alright, let me re-work this. Okay, I think C is the right answer.

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Jovita

1 months ago

Wait, wait, wait. I think you're both overthinking this. Isn't ROI just (net income / total investment) * 100? So it would be ($525,000 / $500,000) * 100 = 105%. C is the right answer.

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Hmm, I'm not sure about that. Wouldn't the ROI be calculated as net income divided by total investment? In that case, the ROI would be $525,000 / $500,000 = 1.05, or 105%. That would make C the right answer.

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Jame

1 months ago

Okay, let's walk through this step-by-step. Total revenue was $1,925,000, total investment was $500,000, and total expenses were $1,400,000. So the net income would be $525,000. Divide that by the total investment and you get 30% ROI. I'm going with D.

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Domonique

1 months ago

Let's see, the information we have is the total revenue, total investment, and total expenses. Shouldn't be too hard to figure out the ROI, right?

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Rhea

1 months ago

Ugh, this is a tricky one. I'm not sure if I have a good handle on how to calculate return on investment. Anyone have any thoughts on this?

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AICPA Exam CPA-Business Topic 1 Question 84 Discussion

Contribute your Thoughts:

Precious

Blair

Jovita

Arleen

Jame

Domonique

Rhea