Business and Finance Basics II

1. A new piece of equipment costs $18,000 with a residual value of $600 and an estimated useful life of five years. Assuming twice the straight-line rate, the book value at the end of year 2 using the declining- balance method is

A. $6,480. B. $11,520. C. $18,000. D. $7,200.

2. Cost of merchandise sold equals beginning inventory

A. minus net purchases minus ending inventory. B. plus net purchases plus ending inventory. C. plus net purchases minus ending inventory.

D. minus net purchases plus ending inventory.

3. 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? A. $4,400 B. $4,000 C. $5,200

D. $6,000

4. Graduated payments result in the borrower paying A. more at the beginning of the mortgage. B. less at the beginning of the mortgage.

C. the mortgage at 1 2 the standard rate.

D. less at the end of the mortgage.

5. 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 612 % and at 8% for 25 years.

A. $115.20 B. $81.12 C. $151.02 D. $91.12

6. 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. $37,339.68 B. $38,739.68 C. $37,399.68 D. $37,939.86

7. 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?

A. $5,300 B. $27,300 C. $11,300 D. $13,300

8. 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?

A. 17.25%17.50% B. 17.00%17.25% C. 16.75%17.00%

D. 16.50%16.75%

9. 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. $40,000 B. $43,560 C. $34,560 D. $15,360

10. Depreciation expense in the declining-balance method is calculated by the depreciation rate

A. plus book value at end of year. B. times book value at beginning of year. C. divided by book value at beginning of year.

D. times accumulated depreciation at year end.

11. Open credit in a revolving charge plan results in

A. one purchase per month. B. as many charged purchases till credit limit is reached. C. the U.S. Rule being applied to each purchase.

D. as many cash purchases till credit limit is reached.

12. Abe Aster bought a new split level for $200,000. Abe put down 30%. Assuming a rate of 1112 % on a 30-year mortgage, use the tables in the Business Math Handbook that accompanies the course textbook to determine Abe's monthly payment.

A. $1,982.00 B. $1,387.40 C. $1,367.80 D. $1,423.80

13. 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. $2,400 B. $2,800 C. $8,200 D. $4,200

14. 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. one payment is added to total value.

D. two payments are added to total value.

15. 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. $8,260.00 C. $11,051.00 D. $9,051.20

16. Ben Brown bought a home for $225,000. He put down 20%. The mortgage is at 6 12% for 30 years. Using the tables in the Business Math Handbook that accompanies the course textbook, determine his monthly payment.

A. $1,139.40 B. $1,319.04 C. $1,216.80 D. $1,319.40

17. Which one of the following methods is not based on the passage of time?

A. Declining-balance method B. Units-of-production method C. None of these

D. Straight-line method

18. In using horizontal analysis, comparative reports are

A. often used. B. never used. C. infrequently used.

D. always used.

19. The average daily balance is equal to the sum of daily balances A. divided by number of days in billing cycle. B. minus number of days in billing cycle. C. multiplied by number of days in billing cycle.

D. plus number of days in billing cycle.

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. $88,362.90 B. $411,588.00 C. $88,632.90 D. $411,858.00

21. Depreciation expense is located on the

A. the accounts payable documentation. B. balance sheet. C. income statement.

D. the accounts receivable documentation.

22. What is a sinking fund? A. It requires one lump sum payment at the beginning.

B. It aids in meeting a future obligation. C. It doesn't compound its money. D. It's not really an annuity.

23. 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. $140,720,000. B. $14,720. C. $140,720. D. $1,407,200.

24. In calculating the daily balance, cash advances are

A. always subtracted out. B. sometimes added in. C. always added in.

D. sometimes subtracted out.

25. A truck costs $35,000 with a residual value of $2,000. Its service life is five years. Using the declining- balance method at twice the straight-line rate, the book value at the end of year 2 is

A. $35,000. B. $22,000. C. $12,600. D. $33,000.