# November 2023 1 A truck costs 16 000 with a residual value of 1 000 It has an estimated useful life of

Calculations Shown

Business Finance

1. 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?

A. $1,500

B. $16,000

C. $12,500

D. $14,500

2. The acid test ratio does not include

A. accounts receivable.

B. inventory.

C. supplies.

D. cash.

3. 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. $15,360

B. $40,000

C. $43,560

D. $34,560

4. 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. At the end of the first period

D. During the first period

5. 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. $8,200

B. $2,800

C. $2,400

D. $4,200

6. 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. 16.75%–17.00%

B. 17.00%–17.25%

C. 16.50%–16.75%

D. 17.25%–17.50%

7. What is a sinking fund?

A. It’s not really an annuity.

B. It doesn’t compound its money.

C. It requires one lump sum payment at the beginning.

D. It aids in meeting a future obligation.

8. 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. $5,200

B. $4,000

C. $4,400

D. $6,000

9. 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. $1,407,200.

D. $140,720.

10. Cost of merchandise sold equals beginning inventory

A. minus net purchases minus ending inventory.

B. minus net purchases plus ending inventory.

C. plus net purchases minus ending inventory.

D. plus net purchases plus ending inventory.

11. Ted Williams made deposits of $500 at the end of each year for eight years. The rate is 8% compounded annually. Using the tables in the Business Math Handbook that accompanies the course textbook, calculate the value of Ted’s annuity at the end of eight years.

A. $2,873.30

B. $2,837.03

C. $5,318.30

D. $4,318.30

12. 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. $411,858.00

B. $88,362.90

C. $88,632.90

D. $411,588.00

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?

A. $184,000.00

B. $242,411.00

C. $242,144.00

D. $327,372.80

14. 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?

A. $14,000

B. $13,100

C. $12,309

D. $12,709

15. Abe Aster bought a new split level for $200,000. Abe put down 30%. Assuming a rate of 111∕ % on a 2 30-year mortgage, use the tables in the Business Math Handbook that accompanies the course textbook to determine Abe’s monthly payment.

A. $1,387.40

B. $1,423.80

C. $1,982.00

D. $1,367.80

16. What does an amortization schedule show?

A. The portion of payment broken down to interest and principal

B. The increase in loan outstanding

C. The balance of interest outstanding

D. The increase to principal

17. A $104,000 selling price with $24,000 down at 81∕ 2% for 25 years results in a monthly payment of

A. $654.60.

B. $546.06.

C. $645.60.

D. $644.80.

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?

A. $626,863.20

B. $606,823.20

C. $600,000.00

D. $457,425.60

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

A. Straight-line method

B. Declining-balance method

C. Units-of-production method

D. None of these

20. Given a mortgage of $48,000 for 15 years with a rate of 11%, what are the total finance charges?

A. $545.76

B. $5,023.68

C. $54,576

D. $50,236.80

21. When are annuity due payments made?

A. At the end of the period

B. Monthly

C. Yearly

D. At the beginning of the period

22. In calculating the daily balance, cash advances are

A. always added in.

B. sometimes subtracted out.

C. always subtracted out.

D. sometimes added in.

24. 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∕ % and at 8% for 25 years. 2

A. $81.12

B. $91.12

C. $151.02

D. $115.20

25. 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. $37,399.68

B. $38,739.68

C. $37,339.68

D. $37,939.86