Florida Business Exam 85 Questions

Question 1

1. All the following are normally required for a loan application except ________________.
   A. an income statement
   B. a balance sheet
   C. a tax return
   D. retained earnings

Answer 1

1. D Page 317

Question 2

2. The only reasonable way to assign overhead is in proportion to ___________________.
   A. income
   B. total expenses
   C. cost of materials
   D. direct labor hours

Answer 2

2. D Page 228

Question 3

3. All the following can be accomplished as the result of a good cash budget except _________________.
   A. plans for the use of excess funds when they are available
   B. reconciliation of the bank statement
   C. preparation for tax liabilities
   D. cash availability for day-to-day operations

Answer 3

3. B Page 173, 174

Question 4

4. When According to the Builder’s Guide to Accounting, when estimating job costs, all the following should be included except for _____________.
   A. labor
   B. material losses
   C. fixed overhead
   D. construction materials

Answer 4

4. B Page 227

Question 5

5. What can a contractor determine at the break even-point?
   A. various yields for different types of jobs
   B. the kind of work that is needed to reach a volume goal
   C. growth potential
   D. the least amount of sales needed to break even, assuming costs and expenses remain reasonably constant

Answer 5

5. D Page 178, 179

Question 6

6. A contractor computes the percentage of gross profit to sales volume over a number of months.
   The contractor finds that gross profit is decreasing in relationship to sales. Of the factors listed below, which is the most likely explanation?
   A. not enough volume of work
   B. sales prices are to high
   C. lack of control over costs
   D. material thefts are decreasing

Answer 6

6. C Page 272

Question 7

7. A contractor will complete a project in 2 years. At the end of the first year, annual gross receipts were $8,500,000. What is the amount that the gross receipts for the second year cannot equal or exceed in order to use the completed contract method of accounting?
   A. $5,000,000
   B $6,500,000
   C. $10,000,000
   D. $11,500,000

Answer 7

7. C Page 25

Question 8

8. Which accounting method is the most acceptable for recording income and expenses for large jobs which last longer than one tax year?
   A. percentage of completion
   B. completed contract
   C. combined accounting
   D. cash accounting

Answer 8

8. A Page 25, 26 & 32

Question 9

9. Billings that have been mailed out by a firm, but for which payment has not been made, are called________.
   A. unearned income
   B. receivable
   C. deferred income
   D. accounts payable

Answer 9

9. B Pages 43 - 46

Question 10

10. When determining a bid for a job, which is considered a fixed overhead expense?
    A. Code office staff
    B. materials needed for the job
    C. purchases of small tools
    D. rental of equipment to be used only for that job

Answer 10

10. A Page 142 and 143

Question 11

11. A valuable method of preparing a cash budget for builders who have wide variations in business volume from month-to-month month is the ____________________.
    A. cash movement method
    B. percentage of completion method
    C. capitalized cost method
    D. source and application of funds method

Answer 11

11. A Page 176

Question 12

12. What prepared document would contain current information about revenue that is due to a company?
    A. cash flow statement
    B. bank balance statement
    C. aging of accounts receivable
    D. income statement

Answer 12

12. C Page 46

Question 13

13. If the current ratio is too low, it may be raised by ____________.
    A. converting cash to fixed assets
    B. retaining profits within the business to buy fixed assets
    C. replacing short-term borrowing with long-term borrowing
    D. increasing its operating costs

Answer 13

13. C Page 174, 175

Question 14

14. According to Builder’s Guide to Accounting, the break-even point ____________.
    A. distinguishes between the various yields of the different jobs and job types
    B. can help the contractor decide what kinds of work he or she needs to reach a volume goal
    C. encourages growth
    D. indicates the minimum sales you need to break even

Answer 14

14. D Page 179

Question 15

15. Which one of the following is an incentive to pay an invoice early or when due?
    A. credit
    B. rebate
    C. discount
    D. additional contracts

Answer 15

15. C Page 59

Question 16

16. Which is the best method to check an estimate in order to eliminate as many errors as possible?
    A. have another estimator take the original estimate and recheck the figures and computations
    B. compare the original estimate with an estimate from a similar project
    C. perform the estimating process a second time and compare it with the initial estimate
    D. have another estimator make an independent estimate and compare it to the original estimate

Answer 16

16. B Page 11 or 225

Question 17

17. All the following statements about bad debts are correct except ____________.
    A. the contractor should make every effort to try to collect bad debt before writing them off as a loss
    B. the reserve for bad debts reduces working capital
    C. the older an outstanding balance becomes, the more likely it is to become a bad debt
    D. bad debt losses have little or no effect on cash budgeting

Answer 17

17. D Page 63 – 67

Question 18

18. When a construction company is applying for a loan, most banks require all the following items except?
    A. a current balance sheet
    B. a current income statement
    C. last year’s federal income tax return
    D. last year’s state income tax return

Answer 18

18. D Page 317

Question 19

19. Which is NOT true concerning a good cash budget?
    A. assists in planning operations for seasonal business
    B. encourages over or under buying of materials
    C. helps in obtaining credit
    D. prepares for tax liabilities

Answer 19

19. B Page 173, 174

Question 20

20. Freight charges on material shipped to a job by the supplier are defined as what type of cost?
    A. direct
    B. incidental
    C. indirect
    D. overhead

Answer 20

20. A Page 115

Question 21

21. For payroll record keeping it is suggested to ______________.
    A. have duplicate time cards properly signed and dated
    B. list payroll checks in separate check registers
    C. give separate stubs only to employees paid overtime that pay period
    D. give your accountant the names and amounts of each check given to each employee

Answer 21

21. B Page 126

Question 22

22. To convince a lender to extend a loan, a contractor must demonstrate that he or she:
    A. will not be under undue financial strain from the loan payments
    B. has the loan amount in an account
    C. has a proven track record for performing excellent work
    D. has a minimum current ratio of 3 to 1

Answer 22

22. A Page 316

Question 23

23. Which of the following is considered a type of accrual?
    A. cash or other payments received
    B. billings mailed out, but not yet paid
    C. anticipated profit from uncompleted work
    D. estimated cost of work not yet completed

Answer 23

23. B Page 11 or 237

Question 24

24. Which would be considered an intangible asset?
    A. cash
    B. patents
    C. fixed assets
    D. prepaid assets

Answer 24

24. B Page 253

Question 25

25. Which is not characteristic of a trial balance? A. it serves as a means of checking whether the general ledger is in balance B. it facilitates the preparation of the financial statement C. it shows at a glance the distribution of the individual accounts D. it shows the current trend in the accounts receivable

Answer 25

25. D Page 250 and 252

Question 26

26. When sales equal the total of fixed, sales expenses and direct costs, this is referred to as ___________. A. cash flow B. available cash C. balance sheet D. breakeven point

Answer 26

26. D Page 179

Question 27

27. Real turnover is an example of what kind of ratio? A. combined B. current C. income D. expense

Answer 27

27. A Page 273

Question 28

28. Deferred income should be entered on a balance sheet as ______________. A. current liability B. long term liability C. deferred credit D. current asset

Answer 28

28. C Page 191

Question 29

29. What is the purpose of preparing an income statement? A. to borrow construction funds or secure personal credit B to divide information into various categories to prepare the cash flow statement C. to show control of costs and expenses, the volume of business, and income yield D. to predict profits over a period of time

Answer 29

29. C Page 249

Question 30

30. Which is a method of improving cash flow? A. maintaining a high inventory B. taking advantage of discounts C. converting all cash sales to accounts receivable D. paying off liabilities

Answer 30

30. B Page 262

Question 31

31. Who is eligible for Small Business Association loans? A. all building contractors in the Unites States B. only company presidents C. applicants who cannot obtain a loan from local banks D. applicants who are recommended by a local bank

Answer 31

31. C Page 318, 319

Question 32

32. When a piece of equipment is sold, why is it necessary to book the transaction separate from regular sales? A. treated as a variable expense B. receives different tax treatment C. transaction is not taxable D. gains or losses must be used to adjust gross profits

Answer 32

32. B Page 170

Question 33

33. Which of the following is an example of an accrual entry? A. depreciation and amortization entries B. entries to record payroll taxes C. entries to record automatic loan payments D. entries to record purchase of material stored at jobsite

Answer 33

33. D Page 237

Question 34

34. To establish an hourly cost for a piece of equipment, the contractor needs to consider all the following except ________________. A. estimated life of the equipment B. cost of the equipment, less salvage value C. replacement cost of the equipment D. estimated average hours of use

Answer 34

34. C Page 159, 160

Question 35

35. Which of the following best describes the accrual method of accounting? A. transactions are recorded when cash is received or paid B. no receivables or payables are recorded on the balance sheet C. revenues are recognized when earned, even though no cash has been received D. payables are recorded before receivables are received

Answer 35

35. C Page 11 or 237

Question 36

36. Which of the following is not a depreciation method recognized by Builder's Guide to Accounting? A. declining balance depreciation B. accumulated cost depreciation C. sum of the years' digits depreciation D. straight line depreciation

Answer 36

36. B Page 163

Question 37

37. A typical purchase order should include all of the following except ______________. A. the billing and delivery address B. a preprinted purchase order number C. sales tax for purchase and for resale D. an authorized signature

Answer 37

37. C Page 116, 117 Note: Key word - "not for resale")

Question 38

38. What financial information summarizes the existing conditions of a business? A. the balance sheet B. the cash flow statement C. the income statement D. the statement of retained earnings

Answer 38

38. A Page 247

Question 39

39. The term "lapping" refers to ____________ taken from the business by moving outstanding balances from one customer account to another. A. cash B. equity C. liabilities D. receivables

Answer 39

39. A Page 181

Question 40

40. What ratios compare accounts on the balance sheet to accounts on the income statement? A. quick assets B. combined C. income D. current

Answer 40

40. B Page 270

Question 41

41. What type of cost basis inventory valuation method uses the current market value of material as it is used? A. specific cost B. first in-first out C. last in-first out D. cost-plus inflation

Answer 41

41. C Page 120

Question 42

42. Which is not used when calculating goods sold to average inventory ratio? A. labor B. materials purchased C. all other direct costs D. total monthly averages

Answer 42

42. D Page 121

Question 43

43. All the following are effects of inventory control except __________________. A. reducing the need for storage space B. quickly providing needed material C. increasing exposure of materials to possible theft or arson D. minimizing investment of capital in inventory

Answer 43

43. C Page 121, 122

Question 44

44. A contractor would use the completed contract method of accounting when _____________. A. most of the jobs last longer 24 months B. the contractor wants a more realistic picture of actual financial performance C. most of the jobs are small, or one-time work jobs with single installment payments D. the contractor has annual sales in excess of $10,000,000

Answer 44

44. C Page 25

Question 45

45. Controlling purchases using a purchase order system could help you control ____________________. A. accounts receivable B. bad debts C. job costs before you are committed D. payroll

Answer 45

45. C Page 116

Question 46

46. What is an advantage of a bad debt reserve? A. it reduces tax liability for earned profit B. it increases assets C. it increases profits D. it simplifies accounting procedures

Answer 46

46. A Page 64

Question 47

47. Who is eligible for Small Business Administration (SBA) loan programs? A. all construction businesses located in the United States B. corporations operated on a non-profit basis C. businesses with fewer than 100 employees regardless of sales volume D. construction businesses with annual sales volume of $17 million and less than 100 employees

Answer 47

47. D Page 318

Question 48

48. What can a contractor determine at the break-even point? A. various yields for different types of jobs B. the kind of work that is needed to reach a volume goal C. growth potential D. the least amount of sales needed to break even, assuming costs and expenses remain reasonably constant

Answer 48

48. D Page 179

Question 49

49. A contractor with serious cash flow problems, but with high volume of work ______________. A. should first try to improve cash flow through budgeting B. should first try to increase the volume of work C. should first try to lower the volume of work D. would likely qualify for a loan

Answer 49

49. A Page 174

Question 50

50. An equity account is best described as the _____________. A. original value of the business B. original inventory of the business C. original investment of the owners D. total value of loans from the bank

Answer 50

50. C Page 253

Question 51

51. Regarding the inventory value, individual labeling is done for what cost basis method? A. first in first out B. last in first out C. perpetual inventory D. specific cost

Answer 51

51. D Page 120

Question 52

52. When a contractor writes off the expense of a piece of equipment over time, that process is called____. A. accelerated depreciation B. depreciating a fixed asset C. depreciation of intangible property D. depreciating a current asset

Answer 52

52. B Page 252 (only fixed assets are depreciated)

Question 53

53. The volume of business that must be maintained in order to avoid a loss is the ______________. A. percentage of sales B. net worth C. available cash D. breakeven point

Answer 53

53. D Page 179

Question 54

54. Which inventory cost-basis valuation method assumes that the first materials purchased are the first used? A. specific cost B. first in first out C. first in last out D. last in first out

Answer 54

54. B Page 120

Question 55

55. All the following are generally found on an invoice except ____________. A. a description of materials B. the sales price of the materials C. the terms of the invoice D. the balance of the customer's account

Answer 55

55. D Page 44 and Figure 3-6

Question 56

56. Current liabilities include the portion of long term debt for equipment purchases that is payable within _______________days. A. 30 B. 90 C. 180 D. 365

Answer 56

56. D Page 155

Question 57

57. What does gross sales less direct costs equal? A. gross profit B. net profit C. income from operations D. net sales

Answer 57

57. A Page 248

Question 58

58. What is the sum of assets minus liabilities? A. net profit B. net worth C. gross sales D. gross profit

Answer 58

58. B Page 247

Question 59

59. All the following would be considered variable overhead expenses except _______________. A. payroll taxes on office salaries B. field office trailer rental C. worker's compensation insurance D. bad debts

Answer 59

59. A Page 142, 143 Payroll taxes on office salaries is a fixed expense

Question 60

60. Successful builders control their costs best at which time? A. at the end of each week B. during each phase of the work C. immediately prior to approving invoices D. in bi-weekly meetings with the owner present

Answer 60

60. B Page 189

Question 61

61. An indicator of how well a company can meet its current obligations is the company's _____________. A. expense ratio B. debt to capitalization ratio C. current ratio D. income to net worth ratio

Answer 61

61. C Page 269

Question 62

62. During the year, a firm used several independent contractors to perform various services. Each of these services involved payments in excess of $600 to the independent contractor performing the services. The independent contractors were not employees of the company. What is the company's responsibility for reporting the earnings of these contractors to the Internal Revenue Service (I.R.S.)? A. the company must immediately file a Form W-4 for these independent contractors B. the company must file Form 1099-MISC to report total payments of $600 or more to these contractors C. the company must carry the contractors as employees and report their earnings along with the company's hourly or salaried personal D. the company has no responsibility. The independent contractors are responsible for reporting their earnings to the I.R.S.

Answer 62

62. B Page 138

Question 63

63. When preparing financial statements, accruals are used to record _________________. A. lump sum payments B. income earned but not yet received C. cash transactions D. prepayments on a future contract

Answer 63

63. B Page 106, 107 Under the accrual method of accounting, revenue is considered earned when services are rendered and expenses are considered to be incurred when services are received.

Question 64

64. Which jobs would not require use of the straight percentage of completion method? A. jobs longer than two years in duration B. firms that require periodic, progressive recognition of profit from their jobs C. construction jobs producing revenue greater than $10 million D. jobs costing $1,000 - $5,000 which take approximately one week to complete

Answer 64

64. D Page 25

Question 65

65. One of the most practical and useful cash controls available is __________________. A. a daily cash summary B. a quarterly cash summary C. a secure petty cash box D. keeping petty cash receipts

Answer 65

65. A Page 180

Question 66

66. All the following are procedures included in the budget process except ________________. A. analyzing the results B. consulting with your accountant C. preparing the budget D. taking action to control expenses

Answer 66

66. B Page 144

Question 67

67. When figuring overhead, which is a fixed expense? A. small tools B. operating supplies C. equipment rental D. advertising

Answer 67

67. D Page 142

Question 68

68. The best way to control equipment costs is good____________. A. maintenance B. scheduling C. financing D. reports

Answer 68

68. B Page 228

Question 69

69. In order to establish an hourly cost for a bulldozer for job allocations, which of the following would not apply? A. cost of equipment less salvage value B. operating costs involving gas, oil, and accessories C. repairing and maintenance costs D. unpredictable job site conditions

Answer 69

69. D Page 159,160

Question 70

70. When preparing a financial statement for a lender before applying for a loan, it is best to first____________. A. accumulate current assets to improve the cash position B. reduce current liabilities C. try to decrease the current ratio D. try to increase the volume of business

Answer 70

70. B Page 174

Question 71

71. All current liabilities include equipment that is payable within _______________. A. 30 days B. 90 days C. 180 days D. 365 days

Answer 71

71. D Page 253

Question 72

72. Which item below is not a fixed asset? * Office furniture $ 1,243 * Land $35,000 * Trucks $ 6,410 * Inventory $20,000 A. inventory B. land C. office furniture D. trucks

Answer 72

72. A Page 252 or 327 (Long-Term Assets) Fixed assets are also referred to as long-term assets.

Question 73

73. When using the inventory ratio method, a high ratio indicates ________________. A. average inventory B. high inventory C. high market average D. low inventory

Answer 73

73. D Page 121

Question 74

74. The first step in preparing a financial statement at the end of an accounting period is to put together ________________. A. a supplementary schedule B. a trial balance C. an income statement D. the closing adjustments

Answer 74

74. B Page 250

Question 75

75. A definite plan for fixed assets should include all of the following except ________________. A. records of maintenance cost B. a determination if proposed equipment is useful for the job C. a policy establishing depreciation rates D. a study of lease vs. purchase options

Answer 75

75. B Page 156

Question 76

76. All the following are advantages of leasing except ___________________. A. an immediate tax deduction is available for the cost of monthly leases B. the equipment will receive regular use C. no large investment or financing commitment is required D. it allows the contractor the chance to evaluate equipment before buying it

Answer 76

76. B Page 169

Question 77

77. Which one of the following assets is eligible for depreciation? A. land B. warehouse C. inventory D. intangible property

Answer 77

77. B Page 162

Question 78

78. Good inventory control ____________________. A. increases exposure to theft B. maximizes the need for storage space C. maximizes investment in capital inventory expenditures D. reduces taxes and insurance costs

Answer 78

78. D Page 121

Question 79

79. Which one of the following is a variable overhead expense? A. utilities B. postage C. labor payroll taxes D. rent

Answer 79

79. C Page 142

Question 80

80. When the plotted job progress curve does not swing up soon enough, the contractor _______________. A. will make a higher overall job profit B. will finish early C. needs to delay scheduled labor and material D. has over-estimated the cost

Answer 80

80. C Page 308

Question 81

81. Which statement regarding leases is not true? A. a lease-purchase agreement for equipment may require little or no initial investment B. depreciation can be claimed on equipment that is lease-purchased C. an immediate tax deduction is not available for the cost of monthly leases D. for equipment that will be used for a brief period of time, leasing is cheaper than owning

Answer 81

81. C Page 169, 170

Question 82

82. A complete cash budgeting plan ______________. A. does not address loan payments B. ignores tax liabilities C. controls the purchase of materials D. addresses the type of business of business organization used

Answer 82

82. C Page 173, 174

Question 83

83. A schedule of equipment time should include all of the following except ______________. A. scheduled time B. the job number C. consideration for adverse weather D. repair time

Answer 83

83. C Page 159

Question 84

84. Which of the following is a current asset? A. accounts payable B. accounts receivable C. construction equipment D. furniture

Answer 84

84. B Page 327 or 252

Question 85

85. When determining a project bid, which of the following expenses is considered an overhead expense? A. costs of recruiting laborers for that job B. materials needed for that job C. purchases of small tools D. rental of equipment to be used only for that job

Answer 85

85. C Page 142, 143 Answer C is the correct answer because the purchases of small tools is an indirect expense (variable expense) not related to any particular job but part of an overhead expense. Answer A is wrong because costs of recruiting laborers for that job is a direct cost Answer B is wrong because materials needed for that job is a direct cost Answer D is wrong because rental of equipment to be used only for that job is a direct cost