Exam Questions

Question 1

In keeping with generally accepted practice, and unless otherwise states, rent and other charges to Tenant should begin:

a. the first day of every month.
b. the last day of every month.
c. upon occupancy by Tenant.
d. upon vacancy by the previous tenant.

Answer 1

c. upon occupancy by Tenant.

Question 2

Greg learns that the _________ accounting cycle, which includes the functions required to lease the office space to tenants for cash, has been poorly administered and recorded.

a. exchange
b. expenditure
c. receipts
d. revenue

Answer 2

d. revenue

Question 3

Greg wants the owners of Enterprising Properties to enjoy the maximum profit possible from The Diesel Shed One way to make certain that a property, owner receives the value of a dollar of rent adjusted for inflation is to ensure leases have a provision to annually increase base rent based on increases in the:

a. GDP.
b. GNP.
c. CPI.
d. WPI.

Answer 3

c. CPI.

Question 4

In a __________ market, when rents are __________ than average, tenants often agree to stepped rent increases throughout their lease term.

a. soft; lower
b. soft; higher
c. tight; lower
d. tight; higher

Answer 4

a. soft; lower

Question 5

As property manager, Bonnie generally delegates the responsibility for preparation of the individual portions of the budget to experts in the field. In other words, she uses __________ budgeting, wherein different parties take responsibility for different sections of the budget for the property.

a. compartmentalized
b. distributed
c. responsibility
d. section

Answer 5

c. responsibility

Question 6

Bonnie knows that no charges can be assessed against tenants in spaces that are vacant. Also, some tenants have expense caps written into their leases. These facts help explain __________, which is the difference between recoverable operating expenses and the actual operating expenses.

a. lagging
b. regression
c. slippage
d. underwriting

Answer 6

c. slippage

Question 7

For budgeting other income amounts (such as rooftop; solar panels and storage), Bonnie is best advised to use a(n) __________ schedule for these additional rent charges.

a. monthly tenant-by-tenant
b. annual tenant-by-tenant
c. monthly property-wide
d. annual property-wide

Answer 7

a. monthly tenant-by-tenant

Question 8

Bonnie has assigned a new hire to code invoices. The first thing the newly hired employee should do to perform this task is:

a. review the budget to determine if the expense items were anticipated.
b check the log to see when the particular invoices were received.
c. sort the invoices into a General Building account.
d. hold the invoices until the first business day of the following month.

Answer 8

a. review the budget to determine if the expense items were anticipated.

Question 9

What type of invoices should Bonnie expect to find in the organization’s computer holding file?

a. paid
b. unpaid
c. operational
d. capital

Answer 9

b. unpaid

Once coded, invoices are entered into a computer holding file (or pending payables file) for all unpaid invoices. Ref 7-12

Question 10

As property manager, which type of purchase order copy would be sent to you once it is approved?

a. the control copy,
b. the receiving copy
c. a numerically filed copy
d. an alphabetically filed copy

Answer 10

c. a numerically filed copy

Once a PO is approved and issued to the vendor is is physically tracked until the order is properly completed, accepted, and paid. In a typical flow, 1 copy goes to the vendor, 1 to the building (the receiving copy), 1 to accounting (the control copy), and a numerically field copy is sent to the manager. Note: PO’s should be issued numerically and tracked in a PO log, a numerical listing of all PO’s ordered.

Question 11

The budget Bonnie draws up is typical in that its time frame corresponds with the reporting frequency required by:

a. GAAP.
b. the owner
c. the state.
d. the federal government.

Answer 11

b. the owner

Typically owners want to see MONTHLY expense budgets because this matches the frequency of all other business activities.

Question 12

Gayle spends time reviewing the general ledger. If it’s been prepared correctly, she should find cash disbursements transferred to the expense accounts as __________ with total disbursements transferred to the cash account as __________.

a. debits, a debit
b. debits; a credit
c. credits, a debit
d. credits, a credit

Answer 12

b. debits; a credit

Question 13

Before Gayle’s hire, Granite Properties had somewhat sloppy procedures for dealing with uncollectible rent recording. Now, however, Gayle ensures adherence with proper procedure. This means that during the income accrual process, the revenue should be recorded, then offset by a(n) __________ reflecting the amount of income deemed uncollectible.

a. deferment
b. expense
c. payment
d. accrual

Answer 13

b. expense

Question 14

One way of making the proposed capital projects more affordable is to take advantage of depreciation. While Canadian depreciation regulations implement the declining balance method, at present, the US is governed by legislation focused on the modified accelerated cost recovery system, which has increased the useful life of commercial, nonresidential, real property to _____ years.

a. 20
b. 25
c. 34
d. 39

Answer 14

d. 39

Note: Created in 1981, ACRS (15-20 years) was replaced by congress in 1987 when they passed MACRS (39 years). AKA Modified Accelerated Cost Recovery System.

Question 15

Gayle tasks one of her subordinates with using the EER to compare the actual performance of the mall against similar commercial retail buildings in the selected region The true average as presented in the report measures the cost or income per square foot of the property by referring __________ of buildings contributing data.

a. only to the size
b. only to the number
c. to both the number and size
d. neither to the number nor size

Answer 15

d. neither to the number nor size

Question 16

Gayle wants the midpoint of a set of data she is analyzing. She therefore wants the:

a. mean
b. median
c. mode
d. range

Answer 16

b. median

Mid-Range point eliminates the top and bottom 25% to shows the middle 50% of date.

Question 17

Gayle relies heavily on the EER, but it does have its limitations. For example, data in the EER may be biased toward __________ properties.

a. older
b. newer
c. larger
d. smaller

Answer 17

a. older

Question 18

Some prospective tenants are more likely than others to bring in sufficient cash in their business operations. There are a few common ratios Gayle has available to her for determining a company’s earning power. Which of the following is not one of them?

a. return on equity
b. price to earnings
c. earnings per share
d. common size comparative statements

Answer 18

b. price to earnings

There are 3 common ratios to determine earning power:

1) return on equity
2) earnings per share
3) common size comparative statements

Question 19

What is a Sundry Charge?

Answer 19

Additional bills to tenant based on the authority of the lease contract (i.e. overtime HVAC, additional Trash Pickup, sub-metered utilities, repairs to tenant owned equipment, etc).

Question 20

Tenant disputes can often be resolved early by:

a. immediate involvement of the landlord’s attorney.
b. reviewing the tenant profile.
c. a quick authoritative response to the inquiry.
d. reading the lease to the tenant.

Answer 20

c. a quick authoritative response to the inquiry.

Question 21

What type of balance do revenues typically have?

a. debit
b. credit
c. positive
d. negative

Answer 21

b. credit

Question 22

Which set of ratios measures the ability of a firm to make a profit?

a. earnings power
b. liquidity
c. solvency
d. profitability

Answer 22

a. earnings power

Note: Additional factors considered include Liquidity (ability to meet current obligations) and Solvency (ability to meet long term obligations).

Question 23

When researching whether costs are being controlled effectively, the first step is to isolate:

a. variable costs.
b. variances caused by uncontrollable factors.
c. variances caused by owner decisions.
d. costs that were not originally budgeted.

Answer 23

b. variances caused by uncontrollable factors.

Note: Ruling out uncontrollable factors gives the owner a truer sense of how the manager is performing.

Question 24

The cutoff date for receivables data is:

a. always the last calendar day of the month.
b. the end of tenant collection efforts.
c. the last day to record tenant receivable activity.
d. the first day of an audit.

Answer 24

c. the last day to record tenant receivable activity.

Note: The general idea is to of s cutoff date is to provide sufficient time for categorizing, verifying and and transferring data from the cash receipts journal to the general ledger.

Question 25

The most pervasive method of cost control is:

a. internal controls.
b. purchase order system.
c. budgeting.
d. expense approvals.

Answer 25

a. internal controls.

Also called accounting controls. Examples include, PO’s, supervisor approvals, approved vendor pools, service contracts, etc.

Question 26

Which is a cost apportionment method?

a. amortization
b. inventory
c. capitalization
d. accrual

Answer 26

a. amortization

Question 27

If a company’s average annual inventory turnover is six, how many months does it take to completely liquidate its inventory?

a. one month
b. two months
c. four months
d. six months

Answer 27

b. two months

Note: inventory turnover is the amount of times a retailer turns over its average inventory during an accounting period.

Question 28

Which does a landlord use as a hedge against inflation?

a. investments in bonds
b. additional rent clauses
c. gross lease formats
d. rent abatements

Answer 28

b. additional rent clauses

Question 29

Before submitting the budget to the owner:

a. have the engineer review all expense items.
b. compare costs per square foot to market averages for reasonableness.
c. budget enough capital expense items to use up any excess cash flows.
d. obtain the services of a CPA for an audit.

Answer 29

a. have the engineer review all expense items.

Question 30

The process of recording and classifying transactions is know as __________.

Answer 30

Bookkeeping

Question 31

A system of summarizing, interpreting and communicating financial data is called __________.

Answer 31

Accounting

Question 32

The functions required to exchange products or services with customers for cash.

Answer 32

Revenue Cycle

Question 33

Those functions that require property, goods, services, and labor; pay for them; and classify, summarize, and report what is acquired and what is paid for.

Answer 33

Expenditure Cycle

Question 34

What type of account subset “Utilities” qualify as?

Answer 34

Level 1

Note: Electricity, Gas, Water, etc. would then qualify as a Level 2 subset.

Question 35

The act of increasing and asset is called?

Answer 35

A debit.

Question 36

An accounting system in which income and expenses are reported when they are earned or incurred rather than when received or paid.

Answer 36

accrual basis accounting

Question 37

Uniform set of financial statements (3)

Answer 37

Balance Sheet, Income Statement, Statement of Cash Flows

Question 38

What’s involved in calculation of property cost increases?

Answer 38

Escalatable Cost Pool, The Base Amount, Tenant’s Pro-Rata Share.