Use the following to answer questions
Little Deer Industries gathered the following year-end data (in thousands) for 2010 and 2009:
$$\begin{array} { l l l }
\text { Curent Assets } & \frac { 2010 } { 2009 } & \frac { 2025 } { \$ 465 } \
\text { Long-Tenn Arsets } & 885 & 585 \
\text { Curtert Liabilities } & 385 & 385 \
\text { Long-Term Liabilities } & 575 & 575 \
\text { Owners' Equity } & 575 & 265 \
\text { Net Sales } & 975 & 775 \
\text { Gross Margir } & 485 & 365 \
\text { Net Income } & 255 & 100
\end{array}$$
-The return on owners' equity for 2010 was:
A)35.0%
B)58.8%
C)60.7%
D)65.3%

Question

Use the following to answer questions 
Little Deer Industries gathered the following year-end data (in thousands) for 2010 and 2009:
 $$\begin{array} { l l l } 
\text { Curent Assets } & \frac { 2010 } { 2009 } & \frac { 2025 } { \$ 465 } \
\text { Long-Tenn Arsets } & 885 & 585 \
\text { Curtert Liabilities } & 385 & 385 \
\text { Long-Term Liabilities } & 575 & 575 \
\text { Owners' Equity } & 575 & 265 \
\text { Net Sales } & 975 & 775 \
\text { Gross Margir } & 485 & 365 \
\text { Net Income } & 255 & 100
\end{array}$$
-The return on owners' equity for 2010 was:
A)35.0%
B)58.8%
C)60.7%
D)65.3%

Quizplus · Accepted Answer

The return on owners' equity formula is: 
Net Income / Average Owners' Equity

For 2010, the net income is stated as $255,000 and the owners' equity is stated as $575,000. However, we need to calculate the average owners' equity by adding the owners' equity at the beginning and end of the year and then dividing by 2.

Average Owners' Equity = (Beginning Equity + Ending Equity) / 2

Beginning Equity for 2010 is $265,000 and Ending Equity for 2010 is $575,000.

Average Owners' Equity = ($265,000 + $575,000) / 2 = $420,000

So, the return on owners' equity for 2010 is: 
$255,000 / $420,000 = 0.607 or 60.7%

Therefore, the best choice is C) 60.7%.

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Little Deer Industries