(Multiple choice)
1. What is the present value factor for an annuity of five periods and an interest rate of 10 percent?
a. 1.6105
b. 6.1051
c. 3.7908
d. 7.7217

2. The university spirit organization needs to buy a car to travel to football games. A dealership in Lockhart has agreed to the following terms: $4,000 down plus 20 monthly payments of $750.
A dealership in Leander will agree to a $1,000 down payment plus 20 monthly payments of $850. The local bank is currently charging an annual interest rate of 12 percent for car loans. Which is the better deal, and why?
a. The Leander offer is better because the total payments of $18,000 are less than the total payments of $19,000 to be made to the Lockhart dealership.
b. The Lockhart offer is better because the cost in terms of present value is less than the present value cost of the Leander offer.
c. The Lockhart offer is better because the monthly payments are less.
d. The Leander offer is better because the cash down payment is less.
e. The Leander offer is better because the cost in terms of present value is less than the present value cost of the Lockhart offer.

3. Which of the following best describes accrued liabilities?
a. Long-term liabilities.
b. Current amounts owed to suppliers of inventory.
c. Current liabilities to be recognized as revenue in a future period.
d. Current amounts owed to various parties excluding suppliers of inventory.

4. Company X has borrowed $100,000 from the bank to be repaid over the next five years, with payments beginning next month. Which of the following best describes the presentation of this debt in the balance sheet as of today (the date of borrowing)?
a. $100,000 in the Long-Term Liability section.
b. $100,000 plus the interest to be paid over the five-year period in the Long-Term Liability section.
c. A portion of the $100,000 in the Current Liability section and the remainder of the principal in the Long-Term Liability section.
d. A portion of the $100,000 plus interest in the Current Liability section and the remainder of the principal plus interest in the Long-Term Liability section.

5. A company is facing a class-action lawsuit in the upcoming year. It is possible, but not probable, that the company will have to pay a settlement of approximately $2,000,000. How would this fact be reported in the financial statements to be issued at the end of the current month?
a. $2,000,000 in the Current Liability section.
b. $2,000,000 in the Long-Term Liability section.
c. In a descriptive narrative in the footnote section.
d. None because disclosure is not required.

6. Which of the following transactions would usually cause accounts payable turnover to increase?
a. Payment of cash to a supplier for merchandise previously purchased on credit.
b. Collection of cash from a customer.
c. Purchase of merchandise on credit.
d. None of the above.

7. How is working capital calculated?
a. Current assets multiplied by current liabilities.
b. Current assets plus current liabilities.
c. Current assets minus current liabilities.
d. Current assets divided by current liabilities.

8. The present value of an annuity of $10,000 per year for 10 years discounted at 8 percent is what amount?
a. $5,002
b. $67,101
c. $53,349
d. $80,000

9. Jacobs Company borrowed 100,000 at 8 percent interest for three months. How much interest does the company owe at the end of three months?
a. $8,000
b. $2,000
c. $800
d. $200

10. Fred wants to save enough money each year so that he can purchase a sports car in January 2013. Fred receives a large bonus from his employer every December 31. He anticipates that the car will cost $54,000 on January 1, 2013. Which of the following will Fred need to calculate how much he must save each December 31?
a. The anticipated interest rate and the present value of $1 table.
b. The anticipated interest rate and the future value of $1 table.
c. The anticipated interest rate and the present value table for annuities.
d. The anticipated interest rate and the future value table for annuities.