Finance-AW-Q480

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Use the following list for the answers to questions 1 through 6

 
a) Creditor
b) Preferred Stock
c) Common Stock
d) Broker’s commission
e) Agency problem
f) Proprietorship
g) Partnership
h) Corporation
i) Cooperative
j) Interest
k) Fixture
l) Estate
m) Lien
n) Dividend
o) Limited Liability Company

 

1. This business limits the liability of all of its owners at a price of double taxation
2. A creditor’s claim against real property
3. First in line in a bankruptcy
 
4. This business is at risk upon the death of its owner
 
5. Hybrid of corporation and partnership (uses advantages of both)
6. The price of money
 
7. In general electronic accounting systems show
 
a) Debits as negative numbers
b) Credits as negative numbers
c) Balance sheet accounts as negative numbers
d) Income statement accounts as negative numbers
 
8. Which is not a step in the Accounting Cycle
 
a) Posting Journal Entries
b) Journalizing a transaction
c) Meeting with Joint Venture Partners
d) Preparing reports
 
9. The purpose of separating responsibilities is to
 
a) Reduce the likeliness of fraud
b) Increase the volume of labor
c) Streamlines processing time
d) Reduce cost of processing
 
10. A goal of many businesses is to have cash flows that are
 
a) Bigger, less risky and more discreet
b) Bigger, sooner and more discreet
c) Bigger, sooner and less risky
d) Sooner, Smoother over time periods and less risky
 
11. Which of the following does not affect the cost of money?
 
a) Reserve account
b) Time preferences for consumption
c) Risk
d) Expected inflation
 
Questions 12 to 13are based on the following case
 
A self-amortizing mortgage for $1M. Assume a 10 period, and 6% interest. Assume annual payments of $135,868.
12. What is the balance of what is owed after the second payment? _____________
 
13. How much interest has been paid in total after the second payment (sum of interest paid in the first and second payments)? _____________
 
14. What is the IRR, assuming abuilding can be purchased for $250,000 and is expected to net $18,000 for each of the next five years and be sold at the end of the fifth year for $280,000?

 
15. Which of the following does NOTdescribe the Internal Rate of Return?
 
a) The discount rate at which Net Present Value = 0
b) The equivalent compound periodic interest rate earned through cash flows on a project assuming equivalent reinvestment over time.
c) The rate at which the future value of invested capital can be determined given assumptions regarding cash flows to be earned in the future.
d) None of the above
 
Questions 16 through18 are based on the following case
 
You are about to buy a building with eight apartments. The average rent for each apartment is $1,500 per month. Assume that each year, the rent in each apartment increases $100 per month. The cost to operate the building is $74K per year, and increases each year by 3%. Assume an exit cap rate of 9%. You expect to hold this investment for 5 years.
 
16. What is the value of the building; assume a discount rate of 9%? ________
 
17. What is the cap rate at the time you buy the building, assuming you purchase it for the value you state above? ________
 
18. What would the mortgage be with a loan to value ration of 75%? ________
 
19. A bank is offering an account with 6% interest as the nominal annual rate. Assume compounding is done monthly, what is the effective annual rate? ____________
 

20. Under what condition would the effective rate be equal to nominal rate?
 
a) If the nominal rate is 5.7%
b) If interest is paid quarterly
c) If interest is paid annually
d) If interest is compounded continuously
 
For Questions 21 to 28 identify what type of account each is by writing next to the account the type (ie Asset, Liability, Income, Expense, Owner’s Equity)(note this is from a Landlord’s perspective)
 
For Example: Cash _Asset______________
 
21. Retained Earnings _______________
 
22. Rent (from tenants) _______________

23. Depreciation Expense _______________
 
24. Pre-paid Rent(from tenants) _______________

25. Equipment _______________

26. Building _______________
 
27. Loan _______________

28. Interest Expense _______________
  
You can read more about our case study assignment help services here.
  

  
Questions 29 to 31, identify the account to be credited and debited, and if this is a cash transaction or not.
 
For Example: When an owner funds a business
Debit _Cash__________ Credit _Owners Equity Cash Transaction? __Yes___
 
29. When rent is collected from a tenant
Debit _____________ Credit ____________ Cash Transaction? __________
 
30. When a loan is paid
Debit _____________ Credit ____________
Debit _____________ Credit ____________ Cash Transaction? __________
 
31. When a security deposit is received
Debit _____________ Credit ____________ Cash Transaction? __________
 
32. The financial statement that gives a snapshot of a company in a moment of time is called
 
a) Income statement
b) Balance Sheet
c) Statement of Cash Flows
d) Sub-ledger
33. Income statement shows a company’s
 
a) Cash Flow
b) Revenueand expenses over a period of time
c) Cash position at a moment in time
d) Value of a company over a period of time
 
34. The statement of cash flows ties to
 
a) Income statement
b) Cash Account
c) Accounts Receivable
d) Asset side of the balance sheet
 
35. A tenant’s account would usually be listed on the
 
a) Balance Sheet
b) Accounts Receivable Sub-ledger
c) Accounts Payable Sub-ledger
d) Income Statement
 
36. Operating budgets generally
 
a) Cover a period of two to ten years
b) Determine what the balance sheet will look like
c) Consist of Income and Expenses
d) Are shaped by spending on long term projects
 
37. Zero base budgets
 
a) Quantify the inputs for each account
b) Are more expedient to prepare than other types
c) Identify inputs only for major accounts
d) Rely on historical information
 
38. Which is not typically considered part of a company’s financial structure
 
a) Long Term Debt
b) Preferred stock
c) Common Stock
d) Accounts payable
 
39. Capital budgeting refers to
 
a) Budgeting for operating expenses
b) Budgeting of long term investments in the company
c) Any budgets more than two years in length
d) Any planning performed in Washington DC
 
40. Internal Rate of Return is determined by
 
a) Discounting the cash flows with the Weighted Average Cost of Capital
b) Forcing the NPV to 0
c) Discounting the Future Value back to Time 0
d) Discounting the WACC by the payback period
 
41. Another metric used in evaluating capital projects is
 
a) Discounted Payback Period
b) Working Capital
c) Gross Potential Income
d) NOI
 
42. Which is one way NOT to address risk?
 
a) Control
b) Retain
c) Avoid
d) Capitalize
 
43. Which is a way to transfer risk?
 
a) Close the swimming pool
b) Purchase insurance
c) Create a reserve fund
d) Publish a tenant handbook
 
44. An umbrella policy
 
a) Insures for no more than the value of the building
b) Protects against very heavy rainstorms
c) Protects against large claims
d) Includes protections against mold
 
45. When receiving proof of insurance from a vendor working on the property, you should get
 
a) Your name on the certificate of insurance as an also insured
b) Host liquor insurance
c) A letter from the vendor with the insurance limits on it
d) Risk mitigation plan
 
46. Income must be adjusted for the following when calculating a building’s cash flow
 
a) Interest
b) Depreciation
c) Unscheduled Income
d) Prepaid Expenses
 
47. Which of the following is NOT a type of exam that is given by a third party auditor
 
a) Compilation
b) Review
c) Stress Test
d) Audit
 
48. Which is the most thorough exam
 
a) Compilation
b) Review
c) Stress Test
d) Audit
 
49. 1099s are generally issued to
 
a) Employees
b) Small vendors for amounts under $600
c) Material Suppliers
d) Non-Employee labor
 
50. Depreciation in a residential building generally occurs over a
 
a) 39 year period
b) 27.5 year period
c) 10 year period if built after 1986
d) period that varies by the size of the building
 
51. Variance analysis
 
a) Should be completed only once a year
b) Is part of the tax filing each year
c) Measures actuals to budget
d) Helps to create surprises
 
52. Budgets
 
a) Are a business plan stated in financial terms
b) List some expenses, but not all
c) Can only last for a year at a time
d) Are always project based
 
53. Which of the following is not a characteristic of an Operating Budget
 
a) Zero based
b) Run-rate based
c) Hybrid of Zero based and Run rate based
d) Prepared for a capital plan
 
54. Which is a package of financial statements
 
a) Balance Sheet, Income Statement, Certificate of Insurance
b) Balance Sheet and Income Statement
c) Balance Sheet, Statement of Cash Flows, Income Statement
d) Certificate of Insurance, Statement of Cash Flows, Income Statement
 
55. Large contracts should be
 
a) Bid
b) Awarded as quickly as possible
c) Started before the paperwork is complete to control costs
d) Reviewed by a third party
 
56. For Account Payables to pay for goods or services, they should have the following items
 
a) Invoice, Purchase Order, Proof of receipt
b) Requisition, Purchase Order, Proof of receipt
c) Invoice, Requisition, Proof of receipt
d) Invoice, Requisition, Certificate of Insurance
 
57. A dollar today is worth __________ than a dollar tomorrow
 
a) More than
b) Less than
c) The same
d) On occasion more on other occasions less
 
58. The rent roll should reconcile to which account on the General Ledger
 
a) Unscheduled Income
b) Accounts Receivable
c) Accounts Payable
d) Cash
 
59. Security deposits should be held
 
a) In a trust account
b) In your operating account
c) In an indexed investment account
d) In your mattress
 
60. Net Operating Income does not include
 

a) Maintenance costs
b) Vacancy Loss
c) The full amount of mortgage payments for self amortizing mortgages
d) Unscheduled income
 
Product Code-Finance-AW-Q480
 

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