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Business and Finance Basics II
1. If a car is depreciated in four years, what is the rate of depreciation using twice the straight-line rate?
2. In using horizontal analysis, comparative reports are
A. often used.
B. infrequently used.
C. always used.
D. never used.
3. Depreciation expense is located on the
A. the accounts payable documentation.
B. income statement.
C. balance sheet.
D. the accounts receivable documention.
4. The acid test ratio does not include
D. accounts receivable.
5. When are annuity due payments made?
A. At the beginning of the period
C. At the end of the period
6. Use the following information to answer the question:
Cost of car: $26,000
Residual value: $6,000
Life: 5 years
Using the given information, determine the depreciation expense for the first year straight-line method?
7. 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
8. 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?
9. 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?
10. Dan Miller bought a new Toyota truck for $28,000. Dan made a down payment of $6,000 and paid
$390 monthly for 70 months. What is the total finance charge?
11. Open credit in a revolving charge plan results in
A. as many charged purchases till credit limit is reached.
B. as many cash purchases till credit limit is reached.
C. one purchase per month.
D. the U.S. Rule being applied to each purchase.
12. Which one of the following methods is not based on the passage of time?
A. Units-of-production method
B. Declining-balance method
C. Straight-line method
D. None of these
13. 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?
14. 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
15. 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
16. Depreciation expense in the declining-balance method is calculated by the depreciation rate
A. times accumulated depreciation at year end.
B. times book value at beginning of year.
C. divided by book value at beginning of year.
D. plus book value at end of year.
17. Abe Aster bought a new split level for $200,000. Abe put down 30%. Assuming a rate of 111∕2% on a
30-year mortgage, use the tables in the Business Math Handbook that accompanies the course textbook to
determine Abe’s monthly payment.
18. 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?
19. 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.
20. Using the tables in the Business Math Handbook that accompanies the course textbook, determine the
difference between the monthly payments on a $120,000 home at 61∕2% and at 8% for 25 years.
21. Cost of merchandise sold equals beginning inventory
A. minus net purchases plus ending inventory.
B. minus net purchases minus ending inventory.
C. plus net purchases plus ending inventory.
D. plus net purchases minus ending inventory.
22. 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. one payment is subtracted from total value.
C. two payments are added to total value.
D. one payment is added to total value.
23. 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 bank-approved credit; amount financed: $5,600
Finance charge: $2,806
Total payments: $8,406
What is the APR by table lookup?
24. What is a sinking fund?
A. It requires one lump sum payment at the beginning.
B. It doesn’t compound its money.
C. It’s not really an annuity.
D. It aids in meeting a future obligation.
25. A truck costs $16,000 with a residual value of $1,000. It has an estimated useful life of five years. If
the truck was bought on July 3, what would be the book value at the end of year 1 using straight-line rate?
Business and Finance Basics III and Statistics
1. Jim opened a new pizza shop. He insures his store for $90,000.00 for fire. What is his premium if the
rate per $100.00 is $0.83?
2. Clay’s Fishing Shop’s beginning inventory is $70,000 and ending inventory is $36,500. What was Clay’s
3. Jay Miller insured his pizza shop for $200,000 for fire insurance at an annual rate per $100 of $.49. At
the end of 10 months, Jay canceled the policy since his pizza shop went out of business. Using the tables in
the Business Math Handbook that accompanies the course textbook, determine the refund to Jay.
4. Personal property items do not include
5. Crestwood Paint Supply had a beginning inventory of 10 cans of paint at $25.00 per can. They
purchased 20 cans during the month at $30.00 per can. They had an ending inventory valued at $500. How
much paint in dollars was used for the month?
6. Which one of the following statements is true about reduced paid-up insurance?
A. It buys protection with paying new premiums.
B. It results in a face amount less than the original amount .
C. It means the original face amount is continued for a certain number of years.
D. It continues for 20 years.
7. Bee Sting bought 400 shares of Google at $399.75 per share. Assume a commission of 2% of the
purchase price. What is the total to Bee?
8. What are overhead expenses?
A. They contribute directly to the running of a business.
B. They’re directly related to a specific department.
C. They contribute indirectly to the running of a business.
D. They’re directly related to a specific product.
9. The cost ratio in the retail method is found by the cost of goods available for sale at cost divided by the
A. cost of goods available for sale at retail.
B. net sales.
C. ending inventory at retail.
D. net purchases at cost.
10. What is the retail method?
A. It doesn’t require a cost ratio.
B. It aids a company in not having to calculate an inventory cost for each individual item.
C. It’s not an estimate.
D. It eliminates the need to take a physical inventory.
11. Bauer Supply had total cost of goods sold of $1,400 with 140 units available for sales. What was the
average cost per unit?
12. Calculate the median from the following numbers: 16 + 9 + 10 + 5 + 4.
13. To avoid distortion of extreme values, a good indicator would be the
14. Which one of the following items is subject to sales tax in the District of Columbia?
A. Roast beef
15. Which one of the following statements is true of specific identification?
A. Ending inventory isn’t associated with specific purchase prices.
B. Low-cost items aren’t used in this method.
C. The specific purchase invoice prices aren’t used.
D. Flow of goods and flow of cost are the same.
16. The tax rate of $.6943 in decimal can be expressed per $100 as
D. $69.43 mills.
17. In terms of premium cost, the most expensive type of insurance is _______ insurance.
A. 20-payment life
B. 20-year endowment
18. With net sales of $40,000, beginning inventory at retail of $14,000, ending inventory at retail of
$20,000, and cost of goods sold of $19,500, what is the inventory turnover at retail rounded to the nearest
19. The range of 35, 22, 43, 18, 22, 27, 48, 39, 31, and 16 is
20. Which one of the following statements is true of preferred stock?
A. It never receives dividends in arrears.
B. It never has a preference to dividends over common stockholders.
C. It has equal rights to common stock.
D. It can be cumulative.
21. Find the mean for the following numbers and do not round your answer to the nearest whole number:
38 + 18.05 + 25 + 26 + 46
22. Total sales of $400,000 that included a 6% sales tax yields actual sales of
23. A bond quote of 82.25 in dollars is equal to
End of exam
24. Suppose Department A is 8,000 square feet, Department B is 5,000 square feet, and Department C is
6,000 square feet. What is the percent of overhead expense applied to Department C? (Round your answer
to the nearest whole percent.)
25. Mike’s condo has a market value of $310,000. The property in Mike’s area is assessed at 40% of the
market value. The tax rate is $145.10 per $1,000 of assessed valuation. The tax for Mike is
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