Select the best answer to each question
1. What is the future value of an ordinary annuity of $12,000 per year, for 3 years, at 9% interest compounded
A. $39,337.20 B. $39,240.00 C. $36,000.00 D. $14,442.75
2. Nick has a revolving department store credit card account with an annual percentage rate of 15%. Last
month's balance on the account was $423.78. During the current month, he made purchases totaling
$123.42 and made a payment of $100.00. The store uses the unpaid balance method. According to this
information, what must be the amount of the finance charge? Round your answer to the nearest cent.
A. $5.30 B. $5.59 C. $6.36 D. $6.71
3. Using the information provided in question 2, what is Nick's current account balance?
A. $380.12 B. $441.61 C. $452.50 D. $453.56
4. On a balance sheet, the accounts of notes payable, salaries payable and taxes payable would fall under
the category of
A. current liabilities B. investments & other assets C. current assets D. long term liabilities
5. A company purchased an air conditioning system for $10,200. The shipping charges on the system were
$875, and the setup costs were $1,250. The system is expected to last five years and has a residual value
of $2,000. If you use the straight line method to calculate the depreciation for this air conditioning system,
What would be the annual depreciation?
A. $2,000 B. $2,040 C. $2,065 D. $2,465
6. Which of the following are the four elements that are included in the total amount of a mortgage payment?
A. The principal, the interest, the tax, and the insurance
B. The principal, the rate, the time, and the interest
C. The title, the closing costs, the closing statement, and the deed
D. The ARM, the PMI, the VA and the FHA
7. Figure A-2
Art's Auto Parts - Annual Inventory of Windshield Wipers
January 1 Beginning Inventory 300 units @ $11.00
March 15 Purchase 150 units @ $10.50
June 10 Purchase 200 units @ $10.75
September 22 Purchase 175 units @ $10.00
December 10 Purchase 100 units @ $12.00
Imagine that you are a manager of an auto parts store. Figure A-2 contains your records of annual inventory
figures for windshield wipers. Using the FIFO method of inventory pricing, what is the dollar value of
ending inventory if there were 300 units on hand December 31? Round the answer to the nearest dollar.
A. $3,188 B. $3,219 C. $3,350 D. $3,600
8. Using the information shown in figure A-2, suppose that the ending inventory on December 31 was 500
units. What would be the dollar value of the ending inventory using the LIFO method of inventory pricing?
Round your answer to the nearest dollar.
A. $5,450 B. $5,413 C. $5,363 D. $5,225
9. Which of the following is known as the accounting equation?
A. assets = liabilities + owner's equity B. profit = revenue – total expenses
C. return on investment = net income / owner's equity D. gross profit margin= gross profit / net sales
10. What would be the monthly payment on a $90,000 mortgage at a rate of 7.5% interest for 30 years?
A. $136.80 B. $562.50 C. $630.00 D. $636.30
11. Wallace and Sarah have decided to purchase furniture for their new home. They have 2 payment options.
The first option is to pay a cash payment of $4,200. The second option is to finance the furniture with a
2 year installment loan. The loan requires a 12% down payment and 24 equal monthly payments of $195.
According to this information, what would be the finance charge on the loan?
A. $3,696 B. $984 C. $504 D. $175
12. Using the information in Question 11, what is the total of the deferred payment price of the furniture?
A. $4,200 B. $4,680 C. $5,184 D. $5,664
13. The Patel family recently purchased a home taking out a mortgage of $235,000 at 8 ¾% for 25 years.
The annual property taxes on the home are $6,345, and the annual hazard insurance is $1,479. What
is the monthly PITI payment for their loan?
A. $2,279.40 B. $2,586.05 C. $1,849.45 D. $652.00
14. How much money must be deposited now, at 6% interest compounded semiannually, to yield an annuity
payment of $4,000 at the beginning of each 6 month period, for a total of 5 years? Round your answer to
the nearest cent.
A. $38,120.80 B. $35,144.44 C. $31,144.40 D. $29,440.36
15. When you are preparing an income statement, to calculate gross margin, you must subtract
A. sales discounts and sales returns and allowances from gross sales
B. cost of goods sold from net sales
C. income tax from income before taxes
D. total operating expenses from net sales
16. Figure A-3 lists financial information for the month of September for a large clothing store. Using the
retail method of inventory, estimate the value of the ending inventory at cost on September 30.
A. $12,283 B. $115,000 C. $140,432 D. $143,750
Financial Highlights for September 1 - September 30
Beginning Inventory $575,000 $718,750
Net Purchases (September) $60,000 $75,000
Net Sales (September) $650,000
17. The method used to calculate depreciation for the federal income tax purposes is the
A. sum of the years' digits method
B. declining balance method
C. units of production method
D. modified accelerated cost recovery system method
18. What sinking fund payment would be required at the end of each three month period, at 8% interest
compounded quarterly, in order to amount to $20,000 within 5 years?
A. $1223.13 B. $1,156.51 C. $823.14 D. $437.04
19. Brenda bought a swimming pool by obtaining an 8% add-on interest installment loan from the bank.
The pool cost $2,400 and the bank required a 15% down payment and equal monthly payments for 2
years. How much is Brenda's monthly payment?
A. $85.00 B. $86.36 C. $98.60 D. $116.00
20. Shawn bought a home with an adjustable-rate mortgage. The margin on the loan is 2.7%, and the rate
cap is 7.2% over the life of the loan. If the current index rate is 4.3%, what is the initial interest rate of the
A. 7% B. 9.9% C. 11.5% D. 14.2%
21. Which of the following is the botXXXXX XXXXXne on the income statement?
A. The gross margin B. The net sales C. The total operating expenses D. The net income (loss)
22. A party supplies store recorded net sales of $423,400 for the year. The store's beginning inventory at retail
was $105,850 and its ending inventory at retail was $127,020. What would be the inventory turnover at
retail, rounded to the nearest tenth?
A. 1.8 B. 3.3 C. 3.6 D. 4.0
23. Ramon owns a home that was appraised for $132,600. The balance remaining on his existing mortgage
is $43,260. Ramon's credit union is willing to loan an amount up to 70% of the appraised value of a home.
Based on this information, what is the maximum potential amount of credit that available for a home equity
A. $92,820 B. $89,340 C. $62,538 D. $49,560
24. What amortization payments would be required every six months, at 14% interest, to pay off a $35,000
loan within four years? Round your answer to the nearest cent.
25. Cassandra is repaying an installment loan of $3,500 with 20 equal payments of $196 each. What is the
annual percentage of the loan?
A. 7.75% B. 11.16% C. 12% D. 13.25%
26. The LaGuardia family's total living expenses are $63,000 a year. After the death of the insured, the total
family income would be $55,000. how much life insurance is required to cover the dependants' income
shortfall, if the prevailing interest rate is 4%.
A. $137,500 B. $157,500 C. $200,000 D. $295,000
27. Last month, Bob took a cruise from Florida to the Bahamas. The cost of his round-trip ticket was $832.
The federal excise tax on the cruise was 8%, and Florida has a sales tax rate of 6%. What was the total
purchase price of Bob's ticket?
A. $832 B. $881.92 C. $898.56 D. $948.48