Financial Calculations Practice Problems and Solutions

School: Dawson College - Course: MARKETING 401-301-DW - Subject: Accounting

DAWSON COLLEGE FINANCIAL CALCULATIONS 2022 TEST 2 Problem 1.(4 points) When Fred of Fred's Auto Repair tallied up his accounts at the end of the year, he found that he had paid GST on parking fees of $2000, supplies of $55000, utilities of $4000, and miscellaneous eligible costs of $3300. During the same time, he found he had charged his customers GST on billings that totalled $175000 for parts and $165650 for labour.If all amounts listed in the accounts are stated before tax, how much GST must Fred send to the federal government? Solution: Tax to be paid = GST collected from selling goods or services-GST paid on costs and expenses GST paid on: parking = 2000 supplies = 55000 utilities = 4000 misc = 3300 GST collected on: parts = 175000 labour = 165000 must pay = GST collected-GST paid = GST * (parts + labour)-GST * (parking + supplies + utilities + misc) = GST * (parts + labour - parking - supplies - utilities - misc) = 0.05 * (175000 + 165650 - 2000 - 55000 - 4000 - 3300) = 0.05 * 276350 = 13817.5 For the rest of the test, ignore taxes. Problem 2.(4 points) Neal's Photographic Supplies sells a Pentax camera for $444.98. The markup is 90 % of cost. (a) How much does the store pay for this camera? Solution: Fundamental equation: price = cost + markup price = 444.98 markup = 0.9 * cost price = cost + markup price = cost + 0.9 * cost 444.98 = 1.9 * cost cost = 444.98 / 1.9 = 234.2 (b) What is the rate of markup based on selling price? Solution: markup = price-cost = 444.98 - 234.2 = 210.78 or markup = 0.9 * cost = 0.9 * 234.2 = 210.78 markup on price = markup / price = 210.78 / 444.98 = 0.4736842105263158 = 47.3684 %

Problem 3.(4 points) A jewellery store paid $36.40 for a watch. Store expenses are 24% of the regular selling price and the profit is 20% of the regular selling price. During a special bargain day sale, the watch was sold at a discount of 15%. What operating profit or loss was realized on the sale? Solution: Fundamental equations: 1. regular price = cost + expenses + profit 2. sale price = (1 - discount) * regular price 3. sale price = cost + expenses + operating profit 1. cost = 36.4 expenses = 0.24 * regular price profit = 0.2 * regular price regular price = cost + expenses + profit regular price = 36.4 + 0.24 * regular price + 0.2 * regular price regular price - 0.24 * regular price - 0.2 * regular price = 36.4 (1 - 0.24 - 0.2) * regular price = 36.4 0.56 * regular price = 36.4 regular price = 36.4 / 0.56 = 65 2. sale price = (1 - 0.15) * regular price sale price = 0.85 * regular price = 0.85 * 65 = 55.25 expenses = 0.24 * 65 = 15.6 3. sale price = cost + expenses + operating profit operating profit = sale price - cost - expenses operating profit = 55.25 - 36.4 - 15.6 = 3.25