Accounting Practice Exam 1: Questions and Solutions

School: Eckerd College - Course: ACCOUNTING 101 - Subject: Accounting

General Accounting Practice Exam 1 DIRECTIONS: Circle the letter corresponding to the best answer for each of the following questions. 1. A discount of $25 was given on a purchase for a new hard drive. The amount due was $225. The discount rate was most nearly __ percent? a. 10 b. 11 c. 90 d. 5 2. A company had 12 clients in 2023, which increased to 21 clients in 2024. If the same percentage rate of increase continues, how many clients will the company have in 2025? a. 33 b. 30 c. 37 d. 26 3. Zenith purchases a house for its appraised value of $250,000 with $20,000 down payment. Assuming her loan is interest-only and at 8% and her sole additional expense is property taxes at 2% annually, what will her yearly expense be? a. $25,000 b. $27,000 c. $20,000 d. $23,400 4. A boat valued at $50,000 was purchased with a $5,000 down payment and a 10% loan contract for the balance. The contract requires a monthly payment of $1,000. The purchase was made on January 1st, with the first payment due on January 31st. Of the $1,000 payment to be made on January 31st, how much will apply to the principal? (Use a 360-day year to compute interest). a. $625 b. $583 c. $375 d. $417 5. Joan Waylor makes $840 in gross wages. Out of these wages the auditor holds back $50 for insurance, resulting in a net pay of $714. What percentage of gross wages is Jon receiving as net pay? a. 70% b. 85% c. 6% d. 118%

Practice Exam 1 - Solutions 1. The total bill was $225 + $25 = $250. $25/$250 is 0.10 .10 x 100=10 percent (%). 2.The answer is 37. The rate of increase is found by dividing the new total by the previous amount; 21 / 12 = 1.75 The rate of increase is thus 175%, represented by 1.75. To find the expected total for the next period you want to multiply the current total by the rate of increase, or 21 x 1.75. As the total is 36.75 and you cannot have a partial client you need to round up. 3.The loan amount is found by subtracting $20,000 from $250,000, resulting in a loan of $230,000. To find the annual interest expense you will multiply the loan amount by the interest rate; $230,000 x 0.08, resulting in $18,400. The property taxes will be based on the entire home purchase amount, or $250,000. To find the annual expense you will multiply the purchase amount by the property tax rate; $250,000 by 0.02, resulting in $5,000. To find her total expense these values should be added together; $18,400 + $5,000 = $23,400.