exam: 060237RR – Business and Finance Basics II .
1. Depreciation expense is located on the
A. income statement.
B. balance sheet.
C. accounts receivable documentation.
D. accounts payable documentation.
2. If a car is depreciated in four years, what’s the rate of depreciation using twice the straight-line rate?
A. 25%
B. 50%
C. 75%
D. 100%
3. Book value is cost _______ accumulated depreciation.
A. divided by
B. minus
C. times
D. plus
4. Jim Hunter has decided to retire to Florida in 10 years. What amount should Jim invest today so that he’ll be able to withdraw $25,000 at the end of each year for 30 years after he retires? Assume he can invest money at 9% interest compounded annually.
A. $105,470.27
B. $18,790.27
C. $108,490.27
D. $10,480.27
5. Art wants to know how much he’ll have to invest today to receive an annuity of $8,000 for three years if interest is earned at 10% annually. He’ll make all of his withdrawals at the end of each year. How much should Art invest?
A. $20,400
B. $19,895.20
C. $21,600
D. $23,280
6. Using the tables found in the textbook, determine the difference between the monthly payments on a $120,000 home at 6½% and at 8% for 25 years.
A. $81.12
B. $151.02
C. $91.12
D. $115.20
7. Depreciation expense in the declining-balance method is calculated by the depreciation rate
A. times book value at beginning of year.
B. times accumulated depreciation at year end.
C. divided by book value at beginning of year.
D. plus book value at end of year.
8. Points represent
A. 2% of the amount of the loan.
B. 3% up-front payment.
C. monthly payments.
D. an additional cost of receiving the mortgage.
9. Use the following information to answer the question: Cost of car: $26,000 Residual value: $6,000 Life: 5 years With the information given, determine the depreciation expense for the first year using the straight-line method.
A. $6,000
B. $4,000
C. $4,400
D. $5,200
10. A variable rate mortgage means
A. larger monthly payments than a fixed rate.
B. the rate is not subject to change.
C. the interest rate is fixed for five years.
D. the interest rate is not fixed.
11. DHL Express bought material handling equipment for its hub operations that cost $1800,000. Using the MACRS, what’s the depreciation expense in Year 3 (using a five-year class)?
A. $40,000
B. $34,560
C. $15,360
D. $43,560
12. Stu Reese has a $150,000 7½% mortgage. His monthly payment is $1,010.10. His first payment will reduce the principal to an outstanding balance of
A. $149,927.40.
B. $149,729.40.
C. $149,910.40.
D. $72.60.
13. With a mortgage of $48,000 for 15 years with a rate of 11%, what are the total finance charges?
A. $54,576
B. $5,023.68
C. $545.76
D. $50,236.80
14. Dylan bought a new Ford truck for $28,000. Dylan made a down payment of $6,000 and paid $390 monthly for 70 months. What’s the total finance charge?
A. $5,300
B. $27,300
C. $13,300
D. $11,300
15. The balance sheet lists A. assets, revenues, and expenses. B. assets, liabilities, and equity. C. assets, liabilities, and expenses. D. assets, revenues, and equity. 16. The acid test ratio does not include
A. inventory.
B. cash.
C. accounts receivable.
D. supplies.
17. In an ordinary annuity, when does the interest on a yearly investment start building interest?
A. At the beginning of the first period
B. After the second period ends
C. During the first period
D. At the end of the first period
18. Ted Williams made deposits of $500 at the end of each year for eight years. The rate is 8% End of exam compounded annually. What’s the value of Ted’s annuity at the end of eight years? (Use the tables found in the textbook.)
A. $5,318.30
B. $4,318.30
C. $2,873.30
D. $2,837.03
19. What does an amortization schedule show?
A. The increase to principal
B. The increase in loan outstanding
C. The portion of payment broken down to interest and principal
D. The balance of interest outstanding
20. At the beginning of each year, Jerome invests $1,400 semiannually at 8% for nine years. Using the tables found in the textbook, determine the cash value of the annuity due at the end of the ninth year.
A. $37,399.68
B. $38,739.68
C. $37,339.68
D. $37,939.86
