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1 Exam Prep – Financial Management (Prometric) 1
1 Exam Prep
Florida Contractors Reference Manual
Financial Management Practice Test
PART ONE
1. What should be the percent of profit earned by a contractor if the total cost was $96,000 on a contract of
$98,000? Select closest answer.
A. 2% C. 10%
B. 5% D. 20%
2. This type of bid is based on a contractor’s cost for a specific time period.
A. Lump sum
B. Unit-price
C. Cost-plus
D. Design-build
3. A current asset is one that is expected to be converted to cash within .
A. 3 months
B. 6 months
C. 1 year
D. 2 years
4. Which of the following is considered a company's asset?
A. Debts owed by the company
B. Cash holdings of the company
C. Accounts payable
D. Net Worth
5. One advantage of the Completed Contract Method of accounting is that .
A. It represents the contractors current financial status.
B. A job is complete when the warranty expires.
C. It allows the contractor to defer income taxes until the project is completed.
D. The company taxes for the fiscal year can be computed throughout the project.
6. If liabilities were $260,000.00 and net worth was $125,453.89, assets would have been .
A. $134,546.11
B. $244,546.11
C. $385,453.89
D. Not enough information to determine.
1 Exam Prep – Financial Management (Prometric) 2
7. If assets were $456,674.98 and net worth was $87,097.56, liabilities would be _ _ .
A. $543,772.54
B. $369,577.42
C. $369,577.42
D. Not enough information to determine.
USE THE FOLLOWING INFORMATION FOR THE NEXT THREE QUESTIONS #8 - #10
8. Using the figures above, the current ratio is .
A. 0.80
B. 1.26
C. 1.03
D. 1.22
9. Using the figures above, a more accurate test for current ratio (quick ratio) yields .
A.0.8
B. 1.256
C. 1.028
D 1.22
10. Using the figures above, the margin of profit is .
A. 2.45%
B. 6.55%
C. 8.22%
D. 37.34%
11. The Estell Construction Company has total liabilities of $5,255 and a total net worth of $10,725. If the
company had fixed assets of $12,255, its total current assets would be .
A. $3,725
B. $5,470
C. $15,980
D. $4,550
Cash $ 229,897.18
Inventory $ 6,455.80
Total Current liabilities $ 188,153.17
Net income $ 15,472.97
Sales $ 632,008.91
1 Exam Prep – Financial Management (Prometric) 3
12. A tractor purchased for $9,000 is to be depreciated straight line for 6 years. The annual depreciation amount
is if the tractor is to have a $1,000 salvage value.
A. $1,500.00
B. $1,333.33
C. $1,000.00
D. $9,000.00
13. Sales for the year totaled $935,000 with direct job costs equaling $623,000 and indirect job costs equaling
$22,000. What is the gross profit on the income statement?
A. $290,000
B. $312,000
C. $645,000
D. $913,000
14. Which of the following is not an "asset" of the company or owner?
A. Accounts receivable
B. Buildings and equipment
C. A creditor's claim
D. Cash
15. The financial ratio that measures the owner's return on his investment is known as _ .
A. Debt to equity ratio
B. Buildings and equipment
C. Margin of Profit
D. Total Asset ratio
16. The point at which gross profit is sufficient to cover all job costs plus fixed overhead is called:
A. Break-Even point
B. Profit margin
C. Cash budget
D. Net Worth
17. According to The Business Procedures Reference Manual for Florida Contractors, what do ratios compare
in corporate accounting?
A. Profit and loss
B. Capability to pay bills
C. Depreciation
D. Inflation
18. How is ratio determined?
A. Multiply current assets with current liabilities
B. Add current assets with current liabilities
C. Divide current assets with current liabilities
D. Subtract current assets with current liabilities
1 Exam Prep – Financial Management (Prometric) 4
19. is a summary of your annual income and expenses.
A. Profit and Loss Statement
B. Balance Sheet
C. Net Worth
D. Cash Flow
20. Which type of contract is based upon the quantity of units used?
A. Lump sum
B. Unit-price
C. Cost-plus
D. Design-build
21. What is the percent of completion to the nearest 10th of a percent? The cost to date is $86,461.24. The
estimated cost to complete is $34,950.00 on a contract for a job sold for $140,000.00.
A. 61.8%
B. 71.2%
C. 73.6%
D. 68.0%
22. Which of the following items should be included in an income statement?
A. Salaries
B. Supplies
C. Payroll taxes
D. All of the above
USE THE FOLLOWING INFORMATION FOR THE NEXT THREE QUESTIONS #23 - #25
23. Using the figures above, the current ratio is .
A. 1.25
B. 1.24
C. 1.18
D. 1.13
Cash $ 129,925.96
Inventory $ 6,330.40
Total Current liabilities $ 109,226.28
Net income $ 13,263.84
Sales $ 532,123.62
1 Exam Prep – Financial Management (Prometric) 5
24. Using the figures above, a more accurate test for current ratio (quick ratio) yields .
A. 1.25
B. 1.24
C. 1.19
D. 1.18
25. Using the figures above, the margin of profit is .
A. 2.45%
B. 2.49%
C. 2.50%
D. 27.34%
26. This practice accumulates cost for the duration of a contract (up to two years), while deferring recognition
of the project income until the final payment is received for that contract.
A. Percentage of Completion
B. Completed Contract
C. Completion-Capitalized Cost
D. Cost-plus Contract
27. The Bennett Construction Company has total liabilities of $6,943 and a total net worth of $12,833. If the
company had fixed assets of $10,305, its total current assets would be .
A. $13,725
B. $14,306
C. $19,776
D. $25,031
28. If liabilities were $110,253.11 and net worth was $138,423.65, assets would have been .
A. $28,170.54
B. $248,676.76
C. $285,243.79
D. Not enough information to determine.
29. What should be the percent of profit earned by a contractor if the total cost was $65,000 on a contract of
$76,000? Select closest answer.
A. 12.5% C. 15%
B. 14.5% D. 20%
30. What is the percent of completion to the nearest 10th of a percent? The cost to date is $66,360.50. The
estimated cost to complete is $24,850.00 on a contract for a job sold for $120,000.00.
A. 71.8% C. 72.7%
B. 72.2% D. 72.8%
1 Exam Prep – Financial Management (Prometric) 6
PART 2
1. Which of the following is considered a company's asset?
A. Debts owed by the company C. Accounts payable
B. Cash holdings of the company D. A financial liability
2. The financial statement showing the owner's equity in a business is referred to as the .
A. Balance sheet
B. Profit and loss statement
C. Summary of operations
D. B and C are correct
3. The income statement is also sometimes called .
A. A balance sheet C. A statement of cash flow
B. The profit and loss statement D. The general ledger
4. Payments received but not yet earned are referred to as income.
A. Loss C. Accrued
B. Profit D. Unearned
5. Given: A construction project's cost as of September 30th 2014 is $34,261 the total estimated costs (at
completion) are $43,832. The contract price for the project is $54,466 and the amount billed as of September
30th 2014 is $41,794.
As of September 30th
2014, using the percent completion method, the revenue recognized in excess of the
amounts billed for this project were .
A. $763 C. $4,004
B. $2,038 D. $7,533
6. The following financial information is available for a job in. progress September 30th 2014.
TOTAL ESTIMATED
CONTRACT BILLINGS COST COST TO
PRICE TO DATE TO DATE COMPLETE
$1,655,400 $1,247,000 $1,264,000 $233,600
As of September 30, 2014, the percent completion of this project was .
A. 71.0% B. 78.6% C. 85.0% D. 89.8%
1 Exam Prep – Financial Management (Prometric) 7
7. Given: On one of a construction company's project costs to date are $28,210 the total estimate cost at
completion is $38,463. The contract price for the project is $48,964 and the amount billed to date is $28,305.
The percent completed for this project is .
A. 57.6% C. 73.3%
B. 67.8% D. 99.4%
8. You billed the owner $57,060 which includes a 10% retainage. The contract amount is $253,600. You
estimate the job is one third complete. Your unearned or accrued income would be .
A. $27,473 unearned C. $21,133 unearned
B. $27,473 accrued D. $21,133
9. Income earned but payment not yet received is referred to as income.
A. Lost C Accrue
B. Profit D. Unearned
10. A construction contract which will last 48 months has an expected total profit of $620,000. Profits will be
realized evenly over the term of the contract. Using the percent completion method of accounting, the third
year’s net profit would be .
A. 0 C. $465,000
B. $155,000 D. $620,000
11. When using the cash method of accounting .
A. Income and expenses are recorded at the time that they are earned or incurred.
B. Income and expenses are recorded at the time they are received or paid.
C. Gives a company more timely financial picture.
D. Give a company a more accurate financial picture.
12. Which of the following statements is false?
A. The older an outstanding debt becomes, the more likely it is to become a bad debt.
B. Typically, it is better to write off bad debts as a tax loss at the end of the year than continue trying to
collect the bad debt.
C. Bad debt losses have little or no effect on cash budgeting.
D. The reserve for bad debts reduces working capital.
13. An analysis of a construction company's past financial performance shows that gross profit has been
decreasing in relation to sales. Which of the following would not be a possible factor contributing to this?
A. Lack of control of material costs.
B. Increase in markup over costs.
C. Inventory losses.
D. Increase in idle time.
1 Exam Prep – Financial Management (Prometric) 8
14. Given: The following information for projects completed in 2013.
Project Number Revenue Direct Direct Costs
103 $ 21,155 $ 12,451
104 $ 34,564 $ 27,517
105 $ 75,022 $ 68,103
106 $ 116,247 $ 109,262
Project number contributed the most to the company's 2013 gross profit.
A. 103 C. 105
B. 104 D. 106
15. A debit memo from your bank could indicate .
A. Interest accrued.
B. A check you wrote for $100 was cleared at $10.
C. A charge for printed checks.
D. None of these.
16. In the purchase journal the contractor's total charge purchases are treated as .
A. Accounts payable.
B. Accounts receivable.
C. Inventory exclusions.
D. Accruals.
17. Purchase journals (for recording purchase orders) are best suited for .
A. Inventory controls. C. Accounts payable source document.
B. Checking the register. D. None of these.
18. Which of the following is not a good method of valuing inventories to be charged to a job?
A. Specific cost. C. Last in-first out.
B. First in-first out. D. Job estimates.
19. Which cost basis valuation method for inventory assumes that the first materials purchased are the first
used?
A. Specific cost. C. Last in-first out.
B. First in-first out. D. Exact purchases price.
20. What is the ratio of Cost of Goods Sold to Average Inventory based on the following data:
Inventory Jan. 1, 2014 15,760
Labor $137,000
Material Purchased $183,500
Other direct costs $ 68,500
Inventory Dec. 31, 2014 $12,340
A. 15.91/1 B. 17.9/1 C. 27.9/1 D. 29.9/1
1 Exam Prep – Financial Management (Prometric) 9
21. The most useful ratio for checking inventory levels in relation to determining what you should do is .
A. Sales/average inventory.
B. Cost of goods sold/average inventory.
C. Material purchased/ average inventory.
D. Total direct cost/average inventory.
22. A current asset is expected to be convertible to cash within .
A. 1 month C. 1 year
B. 6 months D. 5 years
23. Which of the following is not depreciated?
A. office equipment C. office building
B. a truck D. land
24. A piece of equipment is purchased by ABC Contractors for $6,000. The equipment is to be depreciated over
six (6) years. Which depreciation method will yield the smallest depreciation for the first two-(2) years?
A. 200% declining balance. C. 125% declining balance
B. 150% declining balance. D. Straight line
25. The job cost ledger for a project in progress shows the following information for completed site excavation
work:
Superintendent: $3,050
General labor: $4,260
Equipment rental: $4,500
Dewatering: $3,800
Fuel: $1,200
Net profit from sale of soil $6,000
The total volume of material excavated was 12,300 cubic yards at an estimated cost of $2.10 per cubic yard.
Based on the above information the estimated cost for the excavation was .
A. $ 180 too low C. $ 5,820 too high
B. equal to the actual cost D. $ 15,020 too high
26. The best way for a small company to handle disbursements for small day-to-day expenses such as postage,
C.O.D. deliveries and other expenses too small to write a check for is to .
A. Require employees to pay with their own money and reimburse them monthly.
B. Use only those vendors which extend credit.
C. Assign one individual to be responsible for payment and reimburse daily.
D. Set up a "petty cash" and voucher system with enough currency on hand to suit routine periodic
needs, balancing and reimbursing the fund, periodically.
1 Exam Prep – Financial Management (Prometric) 10
27. ABC Contractors receives their December 2013 bank statement:
The balance shown on the bank statement is $12,720.
A $300 charge against the account was incorrectly made by the bank.
A $450 check was received by the bookkeeper on December 29, 2013
when it was deposited into the ABC account.
Outstanding checks totaled $2,740 as of December 31, 2013.
Deposits not posted by December 31, 2013 were $4,280.
Service charge for the month was $22.
An "uncollected funds" charge was $20.
ABC checkbook balance is $14,602 on December 31, 2013.
The actual balance as of December 31, 2013 is .
A. unable to be computed without additional information.
B. $14,602 is the correct balance.
C. $14, 560 is the correct balance.
D. $15,010 is the correct balance.
28. Prepaid insurance is carried as a/an on the Balance Sheet.
A. liability B. fixed asset C. asset D. capital
29. Given XYZ Corporation's balance sheet:
Cash $10,000
Accounts payable $ 2,500
Contracts payable $ 1,700
Note payable $ 3,600
Other liabilities $ 87,500
Accounts receivable $ 3,000
Inventory $ 7,000
Other assets $ 97,500
What is the corporation's net worth?
A. $18,800 B. $20,060 C. $21,500 D. $22,200
30. The balance sheet showing the financial status of the company while the profit and loss statement
measures the expense versus return .
A. over a period of time-----over a period of time.
B. over a period of time-----on a specific date.
C. on a specific date -----over a period of time
D. on a specific date -----on a specific date.
1 Exam Prep – Financial Management (Prometric) 11
31. Given: Direct costs $137,500
Gross sales $ 250,000
Selling expenses $ 56,000
Based on this information the gross profit is and the net income is
A. $98,000--$46,000
B. $33,000--$23,500
C. $112,500--$56,500
D. $112,500--$66,250
32. A construction company has an estimated income (sales) of $300,000 for 2013. In order to achieve a gross
profit ratio of 45% the cost of goods sold should be .
A. $135,000 B. $165,000 C. $195,000 D. $205,000
33. Refer to the balance sheet shown below:
BALANCE SHEET AS OF SEPTEMBER 30, 2012
ASSETS LIABILITIES
Cash $ 5,100 Accounts payable $35,540
Accounts receivable $50,075 Current liabilities $41,540
Current assets $61,575 Long term debt $16,000
Property and equipment $28,225
Total Assets $95,000 Total Liabilities $58,540
During the month of October 2012 the net effect of all business operations was:
Cash increased $9,240
Accounts receivable decreased $4,481
Current liabilities acid long term debt increased $725
The net worth of the company at the end of October 2012 is .
A. $25,014 B. $26,464 C. $35,426; D. $37,494
34. Refer to the balance sheet shown below:
CURRENT ASSETS
Cash $ 38,800.38
Accounts receivable $ 53,850.73
Reserve for bad debt $ 899.78
Net accounts receivable $ 52,950.95
Inventory $ 24,783.16
Total Current Assets $ 116,534.49
CURRENT LIABILITIES Total Current Liabilities $ 110,543.77
What is the "quick ratio" for this company?
A. 0.81 B. 0.83 C. 0.89 D. none of these
1 Exam Prep – Financial Management (Prometric) 12
35. Based on the balance sheet of problem 34, how much cash must be added to the assets to increase the "quick
ratio" to 1.25.
A. $44,689.13 B. $46,428.38 C. $47,867.45 D. none of these
Questions 36 through 38 use the following data:
COMPANY
A B C D .
Current assets 180,000 220,000 110,000 200,000
Total assets 410,000 480,000 360,000 460,000
Current liabilities 110,000 120,000 50,000 130,000
Total liabilities 340,000 360,000 310,000 410,000
Net income 21,000 23,000 14,000 24,000
Total sales 1,050,000 1,250,000 350,000 1,350,000
36. Which of the above companies has the largest current ratio?
A. company A C. company C
B. company B D. company D
37. Which company has the greatest margin of profit?
A. company A C. company C
B. company B D. company D
38. Which company has the greatest amount of working capital?
A. company A C. company C
B. company B D. company D
39. An unsecured contract is payable to Bank One in monthly payments of $744.00 plus simple interest at 11%
per annum on the unpaid balance. The balance due as of December 31, 2007 was $13,392.00. How much of the
January 2008 loan payment to Bank One was for interest?
A. $122.76 C. $744.00
B. $344.03 D. $982.08
1 Exam Prep – Financial Management (Prometric) 13
1 Exam Prep
Florida Contractors Reference Manual
Financial Management Practice Test
PART ONE
1. A Math: Profit = $98,000 - $96,000= $2,000. % Profit = $2,000 + $98,000 (Sales) = 2.04%.
2. A
3. C
4. B
5. C
6. C Assets = Net Worth + Total Liabilities. Assets = $125,453.89 + $260,000 = $385,453.89.
7. B Liabilities = Assets – Net Worth = $456,674.98 - $87,097.56 = $369,577.42.
8. B Current ratio = Current assets + Current liabilities = $236,352.98 ÷ $188,153.17 = 1.256.
9. D Quick Ratio = (Current Assets - Inventory) + Current liabilities = ($236,352 - $6,455.80) +
$188,153.17= 1.22.
10. A Margin of profit = Net income divided by Revenues = $15,472.97 + $632,008.91 = 2.45%.
11. C Total Current Assets = Net worth + Total liabilities = $10,725 +$5,255 = $15,980. Fixed assets don't
apply to current assets.
12. B Straight line depreciation means the same amount every year. Amount to be depreciated is Cost -
Salvage. Math: $9,000 - $1,000 = $8,000 + 6 yrs = $1,333.33/yr.
13. A This isn't spelled out, but Gross profit =Sales - Costs. Costs = Direct + Indirect = $623,000 + $22,000) =
$645,000. Gross Profit = $935,000 - $645,000 = $290,000.
14. C Money owed is a liability
15. B While this term is not mentioned, the net income divided by the owner's equity is a measure of
profitability.
16. A
17. B
18. C.
19. B
20. B
21. B Math: Total Cost = $86,461 + $34,950 = $121,411. % Complete = 86,461 ÷ 121,411 = 71.2%. The
contract price has nothing to do with it.
22. D
23. A Current ratio = Current assets + Current liabilities = 129,925.96 + 6,330.40 = $136,256.36 ÷
$109,226.28= 1.2474.
24. C Quick Ratio = (Current Assets - Inventory) + Current liabilities =
($136,256.36 - $6,330.40) ÷ $109,226.28= 1.1895.
25. B Chapter 10. Ratios. Margin of profit = Net income divided by Revenues = $13,263.84 ÷ $532,123.62 =
2.49%.
26. B Chapter 10, Completed Contract.
27. C Chapter 10. See Sample Balance Sheet. Total Current Assets = Net worth + Total
liabilities = $12,833 + $6,943 = $19,776. Fixed assets don't apply to current assets.
28. B Assets = Net Worth + Total Liabilities. Assets = $138,423.65 + $110,253.11 = $248,676.76.
29. B Math: Profit = $76,000 - $65,000 = $11,000. % Profit = $11,000 ÷ $76,000 = 14.5%.
30. D. Math: Total Cost = $66,360.50 + $24,850 = $91,210.50 % Complete = 66,360.50 ÷ 91,210.50 = 72.8%.
The contract price has nothing to do with it.
1 Exam Prep – Financial Management (Prometric) 14
PART TWO
1. B
2. A
3. B
4. D
5. A
6. C
7. C
8. B
9. C
10. B
11. B
12. C
13. B
14. A
15. B
16. A
17. A
18. D
19. B
20. C
21. B
22. C
23. D
24. D
25. D
26. D
27. C
28. C
29. D
30. C
31. C
32. B
33. D
34. B
35. B
36. C
37. C
38. B
39. A