# (solution) Exam Number: 060322RR Lesson Name: Business and Finance Basics

Exam Number: 060322RR

Exam Number: 060322RR
Lesson Name: Business and Finance Basics II Question 1 of 25 : Select the best answer for the question.
1 1. Jay Corporation has earned \$175,900 after tax. The accountant calculated the return on equity as 12.5%. Jay Corporation's stockholders' equity to the nearest dollar is A. \$140,720. B. \$1,407,200. C. \$140,720,000. D. \$14,720. 2. In an ordinary annuity, when does the interest on a yearly investment start building interest? A. During the first period B. At the beginning of the first period C. After the second period ends D. At the end of the first period 3. At the beginning of each year for 14 years, Sherry Kardell invested \$400 that earns 10% annually. What is the future value of Sherry's account in 14 years? A. \$14,000 B. \$12,309 C. \$13,100 D. \$12,709 4. Use the following information and the tables in the Business Math Handbook that accompanies the course textbook to answer the question.
\$140.10 per month
Cash price: \$5,600
Down payment: \$0
Cash or trade months with bank­approved credit; amount financed: \$5,600
Finance charge: \$2,806
Total payments: \$8,406
What is the APR by table lookup? A. 16.75%?
17.00% B. 17.25%?
17.50% C. 16.50%?
16.75% D. 17.00%?
17.25% 5. In calculating the daily balance, cash advances are A. always subtracted out. B. sometimes subtracted out. C. always added in. D. sometimes added in. 6. Federal Express bought material handling equipment for its hub operations that cost
\$180,000. Using the MACRS, what is the depreciation expense in year 3 (using a five­
year class)? A. \$34,560 B. \$15,360 C. \$40,000 D. \$43,560 7. If a car is depreciated in four years, what is the rate of depreciation using twice the straight­line rate? A. 25% B. 75% C. 100% D. 50% 8. Jen purchased a condo in Naples, Florida, for \$699,000. She put 20% down and financed the rest at 5% for 35 years. What are Jen's total finance charges? A. \$606,823.20 B. \$457,425.60 C. \$600,000.00 D. \$626,863.20 9. Depreciation expense is located on the A. income statement. B. the accounts receivable documention. C. the accounts payable documentation. D. balance sheet. 10. Megan Mei is charged 2 points on a \$120,000 loan at the time of closing. The original price of the home before the down payment was \$140,000. How much do the points in dollars cost Megan? A. \$8,200 B. \$4,200 C. \$2,800 D. \$2,400 11. In using horizontal analysis, comparative reports are A. never used. B. often used. C. always used. D. infrequently used. 12. Ben Brown bought a home for \$225,000. He put down 20%. The mortgage is at 6 ½% for 30 years. Using the tables in the Business Math Handbook that accompanies the course textbook, determine his monthly payment. A. \$1,319.40 B. \$1,319.04 C. \$1,216.80 D. \$1,139.40 13. When are annuity due payments made? A. At the end of the period B. At the beginning of the period C. Monthly D. Yearly 14. At the beginning of each year, Bill Ross invests \$1,400 semiannually at 8% for nine
years. Using the tables in the Business Math Handbook that accompanies the course textbook, determine the cash value of the annuity due at the end of the ninth year.
A. \$37,939.86 B. \$38,739.68 C. \$37,339.68 D. \$37,399.68 15. Dick Hercher bought a home in Homewood, Illinois, for \$230,000. He put down 20% and obtained a mortgage for 25 years at 8%. What is the total interest cost of the loan? A. \$242,411.00 B. \$184,000.00 C. \$327,372.80 D. \$242,144.00 16. The average daily balance is equal to the sum of daily balances A. multiplied by number of days in billing cycle. B. minus number of days in billing cycle. C. divided by number of days in billing cycle. D. plus number of days in billing cycle. 17. An annuity due can use the ordinary annuity table if one extra period is added and A. three payments are subtracted from total value. B. two payments are added to total value. C. one payment is added to total value. D. one payment is subtracted from total value. 18. Lee Company has a current ratio of 2.65. The acid test ratio is 2.01. The current liabilities of Lee are \$45,000. Assuming there are no prepaid expenses, the dollar amount of merchandise inventory is A. \$28,800. B. \$90,450. C. \$28,008. D. \$90,540.
19. A truck costs \$35,000 with a residual value of \$2,000. Its service life is five years. Using the declining­balance method at twice the straight­line rate, the book value at the end of year 2 is A. \$35,000. B. \$33,000. C. \$22,000. D. \$12,600. 20. Joe Sullivan invests \$9,000 at the end of each year for 20 years. The rate of interest Joe gets is 8% annually. Using the tables in the Business Math Handbook that accompanies the course textbook, determine the final value of Joe's investment at the end of the 20th year on this ordinary annuity. A. \$88,632.90 B. \$411,858.00 C. \$88,362.90 D. \$411,588.00 21. Graduated payments result in the borrower paying A. the mortgage at 1?2 the standard rate. B. more at the beginning of the mortgage. C. less at the beginning of the mortgage. D. less at the end of the mortgage. 22. What does an amortization schedule show? A. The balance of interest outstanding B. The portion of payment broken down to interest and principal C. The increase to principal D. The increase in loan outstanding
23. Open credit in a revolving charge plan results in A. as many cash purchases till credit limit is reached. B. as many charged purchases till credit limit is reached. C. one purchase per month. D. the U.S. Rule being applied to each purchase. 24. Cost of merchandise sold equals beginning inventory A. plus net purchases plus ending inventory. B. minus net purchases minus ending inventory. C. plus net purchases minus ending inventory. D. minus net purchases plus ending inventory
25. Connie made deposits of \$2000 at the beginning of each year for four years. The rate she earned is 5% annually. What is the value of Connie's account in four years? A. \$8,260.20 B. \$11,051.00 C. \$9,051.20 D. \$8,260.00