Sarah places four ounces of coffee into an eight-ounce cup and four ounces of cream into a second cup of the same size. She then pours half the coffee from the first cup to the second and, after stirring thoroughly, pours half the liquid in the second cup back to the first. What fraction of the liquid in the first cup is now cream?
$\mathrm{(A) \ } \frac{1}{4}\qquad \mathrm{(B) \ } \frac13\qquad \mathrm{(C) \ } \frac38\qquad \mathrm{(D) \ } \frac25\qquad \mathrm{(E) \ } \frac12$
Solution 1
We will simulate the process in steps.
In the beginning, we have:

$4$ ounces of coffee in cup $1$
$4$ ounces of cream in cup $2$
In the first step we pour $4/2=2$ ounces of coffee from cup $1$ to cup $2$, getting:

$2$ ounces of coffee in cup $1$
$2$ ounces of coffee and $4$ ounces of cream in cup $2$
In the second step we pour $2/2=1$ ounce of coffee and $4/2=2$ ounces of cream from cup $2$ to cup $1$, getting:

$2+1=3$ ounces of coffee and $0+2=2$ ounces of cream in cup $1$
the rest in cup $2$
Hence at the end we have $3+2=5$ ounces of liquid in cup $1$, and out of these $2$ ounces is cream. Thus the answer is $\boxed{\text{(D) } \frac 25}$.

Solution 2
Let's consider this in steps. 
We have 4 ounces of coffee in the first cup. 
We hace 4 ounces of cream in the second cup. 
We take half of the coffee in the first cup(2 ounces), and add it to the second cup, yielding 6 ounces in total in the second cup(in a 1:2 ratio between coffee and cream, respecitvely).
We then take half of the second cup and pour it into the first cup. $6/2=3$, so there is now 5 ounces in the first cup, 2 coffee and 3 the mixture.
Remember that the mixture is in a 1:2 ratio between coffee and cream. So, coffee has one ounce and cream has 2 ounces. 
In total, there is 2 ounces in the 5 ounce first cup. Putting 2 over 5, we get the answer. Therefore, the answer is $\boxed{\text{(D) } \frac 25}$.
~MathKatana