# Intro To Financial Math

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. 60-minute test with 60 questions. Calculators are allowed. Good luck!

• 1.

### Utilities, employee wages, and taxes are examples of

• A.

Nonrecurring expenses

• B.

Variable expenses

• C.

Operating expenses

• D.

Flexible expenses

C. Operating expenses
Explanation
Operating expenses refer to the regular and ongoing costs incurred by a business to maintain its daily operations. This includes expenses such as utilities, employee wages, and taxes. These expenses are necessary for the business to function and are typically recurring in nature. Unlike nonrecurring or one-time expenses, operating expenses are incurred regularly and are essential for the day-to-day functioning of the business. Therefore, operating expenses is the correct answer in this case.

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• 2.

### The financial statement that includes revenue and expenses is the

• A.

Income statement

• B.

Net worth statement

• C.

Owner’s equity statement

• D.

Balance sheet

A. Income statement
Explanation
The income statement is the correct answer because it is the financial statement that shows the revenue and expenses of a company over a specific period of time. It provides a summary of the company's financial performance and helps assess its profitability. The net worth statement, owner's equity statement, and balance sheet are other financial statements that provide different information about a company's financial position, but they do not specifically include revenue and expenses.

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• 3.

### The amount the business pays for the merchandise it sells is

• A.

Net profit

• B.

Cost of goods sold

• C.

Gross profit

• D.

Net gain

B. Cost of goods sold
Explanation
The cost of goods sold refers to the amount of money that a business pays for the merchandise it sells. It includes the cost of purchasing the goods, as well as any additional expenses incurred to bring the goods to a sellable condition. This is an important metric for businesses as it directly impacts their profitability. By subtracting the cost of goods sold from the revenue generated from sales, businesses can calculate their gross profit and determine the effectiveness of their pricing and inventory management strategies.

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• 4.

### Net sales – Cost of goods sold =

• A.

Net profit

• B.

Net worth

• C.

Net loss

• D.

Gross profit

D. Gross profit
Explanation
The correct answer is gross profit. Gross profit is calculated by subtracting the cost of goods sold from the net sales. It represents the profit made from the sale of goods before deducting other expenses such as operating expenses. Net profit, on the other hand, is the final profit after deducting all expenses from the gross profit. Net worth is the total assets minus total liabilities of a company, and net loss occurs when the expenses exceed the revenue.

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• 5.

### Amounts that a person owes financial institutions and department stores are

• A.

Income

• B.

Liabilities

• C.

Capital

• D.

Assets

B. Liabilities
Explanation
The correct answer is liabilities because amounts that a person owes financial institutions and department stores are considered debts or obligations, which are categorized as liabilities. Liabilities represent the financial obligations of an individual or entity and are recorded on the balance sheet. They can include loans, credit card debt, mortgages, or any other outstanding payments that need to be settled.

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• 6.

### Items owned by a person or business are

• A.

Assets

• B.

Net worth

• C.

Liabilities

• D.

Capital

A. Assets
Explanation
Assets are items owned by a person or business that have value and can be used to generate income or provide future benefits. They can include tangible assets such as property, equipment, or inventory, as well as intangible assets like patents or trademarks. Net worth refers to the total value of a person or business's assets minus their liabilities. Liabilities are debts or obligations owed by a person or business, while capital refers to the financial resources used to start or operate a business. Therefore, the correct answer is assets.

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• 7.

### Business transactions are entered in a(n)

• A.

Net worth state

• B.

Balance sheet

• C.

Journal

• D.

Income statement

C. Journal
Explanation
Business transactions are entered in a journal. A journal is a chronological record of all the financial transactions of a business. It serves as the first step in the accounting cycle and provides a detailed account of each transaction, including the date, description, and amount. The journal is used to record transactions before they are transferred to the general ledger and eventually summarized in financial statements such as the balance sheet and income statement.

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• 8.

### Calculate current ratio by

• A.

Subtracting current liabilities from current assets

• B.

Multiplying the amount of current assets by the amount of current liabilities

• C.

Adding current assets and current liabilities

• D.

Dividing the amount of current assets by the amount of current liabilities

D. Dividing the amount of current assets by the amount of current liabilities
Explanation
The current ratio is a measure of a company's ability to pay off its short-term liabilities using its short-term assets. It is calculated by dividing the amount of current assets by the amount of current liabilities. This ratio helps to assess the liquidity and financial health of a company. A higher current ratio indicates a stronger ability to meet short-term obligations, while a lower ratio may suggest potential liquidity issues.

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• 9.

### Assets that can be quickly converted to cash are

• A.

Long-term

• B.

Current

• C.

Mutual funds

• D.

Real estate

B. Current
Explanation
Current assets are assets that can be easily converted into cash within a short period of time, usually within one year. This includes cash and cash equivalents, accounts receivable, inventory, and short-term investments. Long-term assets, on the other hand, are assets that are expected to provide economic benefits for more than one year, such as property, plant, and equipment. Mutual funds and real estate can be considered long-term assets as they are not easily converted into cash. Therefore, the correct answer is "current" as it refers to assets that can be quickly converted to cash.

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• 10.

### How quickly assets can be turned to cash is called

• A.

Fluid

• B.

Volatility

• C.

Liquidity

• D.

Mobility

C. Liquidity
Explanation
Liquidity refers to how quickly assets can be converted into cash without impacting their market value. It is a measure of how easily an asset can be bought or sold in the market. The higher the liquidity, the easier it is to buy or sell an asset without causing significant price changes. In contrast, if an asset has low liquidity, it may take longer to convert it into cash or may require selling at a lower price. Therefore, liquidity is the appropriate term to describe the speed at which assets can be turned into cash.

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• 11.

### Dividing the amount of the current assets by the amount of current liabilities is the formula for

• A.

Net worth

• B.

Current ratio

• C.

Credit worthiness

• D.

Common cents

B. Current ratio
Explanation
The current ratio is a financial ratio that measures a company's ability to cover its short-term obligations with its short-term assets. By dividing the amount of current assets by the amount of current liabilities, this ratio provides insight into the liquidity of a company and its ability to meet its short-term financial obligations. It is widely used by investors and creditors to assess a company's financial health and its ability to pay off its debts.

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• 12.

### Checks are ______ used to withdraw money from an account.

• A.

Credit cards

• B.

Debit cards

• C.

Deposits

• D.

Drafts

D. Drafts
Explanation
Drafts are commonly used to withdraw money from an account. Unlike credit cards and debit cards, which are primarily used for making purchases, drafts are specifically designed for withdrawing cash. Deposits, on the other hand, involve adding money to an account rather than taking it out. Therefore, drafts are the most suitable option for withdrawing money from an account.

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• 13.

### A check that has cleared/been processed by the bank is a(n)

• A.

Canceled check

• B.

Debit

• C.

Overdraft

• D.

Float

A. Canceled check
Explanation
A canceled check refers to a check that has been processed and cleared by the bank. Once a check is canceled, it cannot be used again, ensuring that the funds are deducted from the payer's account and transferred to the payee's account. This provides proof of payment and prevents any further transactions using the same check.

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• 14.

### When a person writes a check, realizing that they have insufficient funds and hoping they can make a deposit before the check is cashed is called

• A.

Covering a check

• B.

Clearing a check

• C.

Borrowing

• D.

Floating a check

D. Floating a check
Explanation
Floating a check refers to the practice of intentionally writing a check when there are insufficient funds in the account, with the hope that the person will be able to deposit money before the check is presented for payment. This is a form of check kiting, which is illegal and considered fraudulent. By intentionally delaying the deposit of funds, the person is essentially using the time gap between writing the check and it being cashed to temporarily create the illusion of having enough funds in the account.

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• 15.

### Money put into a checking account is called aWhich one do you like?

• A.

Net gain

• B.

Credit

• C.

Liability

• D.

Demand deposit

D. Demand deposit
Explanation
A demand deposit refers to money that is deposited into a checking account. It is called a demand deposit because the account holder can withdraw the funds on demand, meaning they can access and use the money whenever they need it. This type of account is typically used for everyday financial transactions, such as paying bills and making purchases. Therefore, the correct answer is demand deposit.

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• 16.

### The person authorized to write checks is theWhich one do you like?

• A.

Maker

• B.

Payee

• C.

Creditor

• D.

Endorser

A. Maker
Explanation
The person authorized to write checks is referred to as the "maker". The maker is the individual who has the authority to sign and issue checks on behalf of a company or organization. They are responsible for ensuring that the necessary funds are available in the account and that the check is properly filled out and signed. The maker is typically a designated member of the organization's management or finance team.

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• 17.

### A check written by the bank on its own funds is aWhich one do you like?

• A.

Bank draft

• B.

Cashier’s check

• C.

Certified check

• D.

Money order

B. Cashier’s check
Explanation
A check written by the bank on its own funds is known as a cashier's check. This type of check is considered more secure than a personal check because the funds are guaranteed by the bank. When a cashier's check is issued, the bank sets aside the full amount of the check in its own account, ensuring that the funds are available when the check is presented for payment. This makes a cashier's check a reliable form of payment, often required for large transactions or when a recipient wants to ensure they will receive the full amount owed.

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• 18.

### A personal check that the bank guarantees to be good is theWhich one do you like?

• A.

Bank draft

• B.

Cashier check

• C.

Certified check

• D.

Money order

C. Certified check
Explanation
A certified check is a personal check that the bank guarantees to be good. This means that the bank verifies that the funds are available in the account and sets them aside to cover the check. The bank then stamps or signs the check to certify it, giving the recipient assurance that the check will not bounce. This makes a certified check a secure form of payment, especially for larger amounts, as the bank guarantees the funds.

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• 19.

### The ____ can be purchased at a bank, service stations, and supermarkets to individuals who do not wish to use cash and do not have a checking account.

• A.

Credit card

• B.

Money order

• C.

Debit card

• D.

Bank draft

B. Money order
Explanation
A money order is a form of payment that can be purchased at various locations such as banks, service stations, and supermarkets. It is a popular option for individuals who do not want to use cash and do not have a checking account. Unlike a credit card or debit card, a money order is a prepaid instrument that allows the individual to make a payment without the need for a bank account or credit history. It provides a secure and convenient way to make payments for those who prefer not to carry cash or use traditional banking methods.

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• 20.

### “For deposit only” is an example of a

• A.

Restrictive endorsement

• B.

Blank endorsement

• C.

Special endorsement

• D.

Secondary endorsement

A. Restrictive endorsement
Explanation
A "restrictive endorsement" is when the payee of a check writes "For deposit only" on the back of the check, limiting its use to a specific purpose, such as depositing into their own bank account. This endorsement prevents the check from being cashed by anyone else and provides added security. A blank endorsement, on the other hand, is when the payee simply signs their name on the back of the check, making it payable to anyone who possesses it. A special endorsement is when the payee transfers the check to someone else by signing their name and specifying the new payee. A secondary endorsement is not a recognized term in relation to endorsements.

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• 21.

### The process of matching your checkbook register with the bank statement is called

• A.

Transfer

• B.

Confirmation

• C.

Reconciliation

• D.

Evaluation

C. Reconciliation
Explanation
The process of matching your checkbook register with the bank statement is called reconciliation. This involves comparing the transactions recorded in your checkbook register with the transactions listed on the bank statement to ensure that they match. Reconciliation helps identify any discrepancies or errors, such as missing or incorrect transactions, and allows you to correct them. It is an important step in managing your finances and maintaining accurate records of your financial transactions.

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• 22.

### Normally checks will not be honored after ____ months.

• A.

12

• B.

3

• C.

2

• D.

6

D. 6
Explanation
Checks typically have an expiration date, and it is common for checks to not be honored after a certain number of months. In this case, the correct answer is 6 months. After this period, banks may refuse to accept the check for payment as it may be considered stale or expired. This is done to protect against fraud and ensure that the check is still valid and the funds are available.

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• 23.

### Which of the following factors will not impact the cost of your auto insurance?

• A.

Driving violations

• B.

Use of the car

• C.

Color of the car

• D.

Age of the driver

C. Color of the car
Explanation
The color of the car will not impact the cost of your auto insurance. Auto insurance rates are determined by factors such as driving violations, use of the car, and age of the driver. The color of the car does not affect the risk of accidents or insurance claims, so it is not considered when calculating insurance premiums.

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• 24.

### All of the following are examples of employee benefits except

• A.

Transportation

• B.

Workers compensation

• C.

Health insurance

• D.

Retirement matching plans

B. Workers compensation
Explanation
Workers compensation is not considered an employee benefit because it is a form of insurance that provides financial assistance to employees who suffer work-related injuries or illnesses. Unlike other employee benefits such as transportation, health insurance, and retirement matching plans, workers compensation is specifically designed to cover medical expenses and lost wages resulting from workplace accidents or occupational diseases.

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• 25.

### The equation for simple interest is

• A.

Principal – interest

• B.

Principal x rate x time

• C.

Principal + interest

• D.

Principal x rate

B. Principal x rate x time
Explanation
The equation for simple interest is calculated by multiplying the principal amount by the rate of interest and the time period. This is because the interest accrued is directly proportional to the principal, the rate at which interest is charged, and the duration for which the interest is applied. Therefore, the correct answer is principal x rate x time.

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• 26.

### Stop payment order is

• A.

A safeguard for a checking account

• B.

A request that the bank not cash or process a specific check

• C.

Another name for a joint account

• D.

The amount you want to keep out of a deposit

B. A request that the bank not cash or process a specific check
Explanation
A stop payment order is a request made to the bank to prevent the cashing or processing of a specific check. This is typically done when the account holder wants to prevent a specific payment from being made, such as in the case of a lost or stolen check, or if there is a dispute over the payment. The bank is then obligated to not honor the check and prevent it from being processed, providing a safeguard for the checking account holder.

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• 27.

### The ____ on the check allows you to write the purpose of the check.

• A.

Payee

• B.

ABA number

• C.

Routing number

• D.

Memo

D. Memo
Explanation
The memo on the check allows you to write the purpose of the check. This can be used to provide additional information or instructions to the recipient of the check, such as specifying what the payment is for or any other relevant details. The memo field is typically located near the bottom left corner of the check and provides a space for you to include any necessary notes.

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• 28.

### NSF is printed on a check that

• A.

Has bounced

• B.

Has been paid

• C.

Has been processed

• D.

Has cleared the ban

A. Has bounced
Explanation
NSF stands for "Non-Sufficient Funds". When NSF is printed on a check, it means that the check has bounced, indicating that the account holder did not have enough funds in their account to cover the payment. This can happen if the account holder has insufficient funds, has closed their account, or if there is a hold or freeze on their account. As a result, the payment is not processed and the check is returned unpaid.

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• 29.

### The ______ lists payments and deposits processed by the bank during a month and the balance of your checking account according to the bank.

• A.

Income statement

• B.

Bank statement

• C.

Balance sheet

• D.

Net worth statement

B. Bank statement
Explanation
A bank statement is a document provided by the bank that lists all the payments and deposits made by the account holder during a specific period, usually a month. It also shows the balance of the checking account according to the bank. This statement is important for individuals to keep track of their financial transactions and ensure accuracy in their account balance. It helps in reconciling the account and identifying any discrepancies or unauthorized transactions.

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• 30.

### The person authorized to write checks on an account is the

• A.

Router

• B.

Payee

• C.

Endorser

• D.

Maker

D. Maker
Explanation
The person authorized to write checks on an account is referred to as the "maker." This individual has the authority to create and sign checks, authorizing the transfer of funds from the account to the designated payee. The maker is responsible for ensuring that the necessary funds are available in the account before issuing the check.

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• 31.

### The checking account number

• A.

Is the ABA number

• B.

Appears in bank coding at the bottom of the check

• C.

Is not printed on the check

• D.

Is the check number

B. Appears in bank coding at the bottom of the check
Explanation
The checking account number appears in bank coding at the bottom of the check. This means that the ABA number, which is a unique identifier for the bank, can be found in the bank coding section at the bottom of the check. It is important to note that the checking account number is different from the check number, which is used to identify the specific check within a checkbook.

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• 32.

### The _____ appears in fraction form in the upper right corner of each check.

• A.

Checking account number

• B.

Routing number

• C.

ABA number

• D.

Check number

C. ABA number
Explanation
The ABA number appears in fraction form in the upper right corner of each check. This number is used to identify the specific bank or financial institution associated with the checking account. It is commonly used for electronic transactions, such as direct deposits or automatic bill payments. The fraction form of the ABA number includes a numerator and a denominator, which helps to further identify the specific branch or location of the bank.

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• 33.

### When a bank covers a check written for an amount greater than the balance in the account, they charge the customer a(n) _____ fee.

• A.

Service

• B.

Interest

• C.

Account

• D.

Overdraft

D. Overdraft
Explanation
When a bank covers a check written for an amount greater than the balance in the account, they charge the customer an overdraft fee. This fee is imposed as a penalty for the customer's insufficient funds and covers the bank's cost of processing the transaction.

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• 34.

### Assets – Liabilities =

• A.

Current ratio

• B.

Net income

• C.

Net loss

• D.

Net worth

D. Net worth
Explanation
Net worth is the correct answer because it is the difference between a person or organization's total assets and total liabilities. It represents the value of their ownership interest in their assets after deducting all debts and obligations. Net worth is a measure of financial health and is used to assess an individual or company's overall financial position.

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• 35.

### One mile equals

• A.

1,609.34 meters

• B.

500 meters

• C.

1,000 meters

• D.

50 meters

A. 1,609.34 meters
Explanation
One mile is equivalent to 1,609.34 meters. This conversion factor is widely used in many countries around the world. Therefore, the correct answer is 1,609.34 meters.

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• 36.

### 70 miles per hour equals

• A.

35 kilometers (km) per hour

• B.

112.65 kilometers (km) per hour

• C.

65 kilometers (km) per hour

• D.

210 kilometers (km) per hour

B. 112.65 kilometers (km) per hour
Explanation
To convert miles per hour to kilometers per hour, we need to multiply the value in miles per hour by the conversion factor of 1.60934. Therefore, 70 miles per hour is equal to 70 * 1.60934 = 112.65 kilometers per hour.

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• 37.

### You want to purchase new carpet for your living room that measures 20 feet by 10 feet. The carpet costs 4.50 per square foot. How much will your living room carpet cost?

• A.

\$900

• B.

\$1,200

• C.

\$600

• D.

\$1,000

A. \$900
Explanation
To find the cost of the carpet, we need to calculate the area of the living room first. The area can be found by multiplying the length and width of the room, which gives us 20 feet x 10 feet = 200 square feet. Since the carpet costs \$4.50 per square foot, we can multiply the area (200 square feet) by the cost per square foot (\$4.50) to get the total cost. Therefore, the living room carpet will cost \$900.

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• 38.

### A section of land is 560 acres. You have inherited three sections of land and charge a tenant \$325 per acre each year for rent. How much does the tenant owe you for rent each year?

• A.

\$546,000

• B.

\$446,000

• C.

\$346,000

• D.

\$246,000

A. \$546,000
Explanation
Since each section of land is 560 acres, and the tenant is charged \$325 per acre each year for rent, the total rent for one section of land would be 560 acres * \$325/acre = \$182,000. Since the person inherited three sections of land, the total rent for all three sections would be \$182,000 * 3 = \$546,000. Therefore, the tenant owes \$546,000 for rent each year.

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• 39.

### Which of the following is not an example of a rational number?

• A.

10

• B.

6

• C.

5

• D.

Square root of 2

D. Square root of 2
Explanation
The square root of 2 is not an example of a rational number because it cannot be expressed as a fraction of two integers. A rational number is any number that can be written as the ratio of two integers, such as 10/1, 6/1, and 5/1. However, the square root of 2 is an irrational number, meaning it cannot be expressed as a fraction and has an infinite and non-repeating decimal representation.

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• 40.

### A current U.S. dollar is worth 0.77952 Euros. You are visiting France and purchase a shirt for 31.1808 Euros. What is the dollar cost of the shirt?

• A.

\$40

• B.

\$80

• C.

\$60

• D.

\$50

A. \$40
Explanation
To find the dollar cost of the shirt, we need to divide the cost in Euros by the exchange rate. Dividing 31.1808 Euros by 0.77952 Euros/USD gives us approximately \$40. Therefore, the dollar cost of the shirt is \$40.

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• 41.

### You receive a trade discount of 15% for making a large order. Your order totals \$1350.00. How much will you pay??

• A.

\$1,350.00

• B.

\$1,472.00

• C.

\$1,200.00

• D.

\$1,147.50

D. \$1,147.50
Explanation
When you receive a trade discount of 15% for making a large order, it means that you will get a reduction of 15% off the total amount. To calculate the amount you will pay, you need to subtract the discount from the original total. In this case, the original total is \$1350.00. So, you need to subtract 15% of \$1350.00 from \$1350.00. 15% of \$1350.00 is \$202.50. Subtracting \$202.50 from \$1350.00 gives you \$1147.50, which is the amount you will pay.

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• 42.

### One gallon of paint that sells for \$42.00 covers 6200 square feet of wall. Your new house has 100,000 square feet of wall space needing paint. What will your paint cost for this project? (Assuming you can only buy gallon sized paint cans)

• A.

\$672

• B.

\$714

• C.

\$677.46

• D.

\$756

B. \$714
Explanation
To find the cost of paint for the project, we need to calculate how many gallons of paint are needed. Since one gallon covers 6200 square feet, we divide the total square footage of the walls (100,000) by 6200. This gives us approximately 16.13 gallons. Since we can only buy gallon-sized cans, we round up to 17 gallons. Therefore, the cost of paint for the project is 17 gallons multiplied by \$42.00 per gallon, which equals \$714.

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• 43.

### A recipe calls for two pints of cream. How many cups does this equal?

• A.

6

• B.

8

• C.

3

• D.

4

D. 4
Explanation
Two pints of cream is equal to four cups. In the US customary system, there are two cups in a pint, so if we have two pints, we can multiply that by two to get the total number of cups, which is four. Therefore, the correct answer is 4.

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• 44.

### How many ounces are in a two-liter bottle?

• A.

40.8

• B.

52.8

• C.

38.8

• D.

67.6

D. 67.6
Explanation
A two-liter bottle contains 67.6 ounces. This is a commonly known conversion in the United States, where a liter is equal to 67.6 fluid ounces.

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• 45.

### You have just purchased 101.442 ounces of soda. How many liters have you purchased?

• A.

4

• B.

3.5

• C.

3

• D.

2

C. 3
Explanation
To convert ounces to liters, we need to know the conversion factor. Since 1 ounce is approximately equal to 0.0296 liters, we can multiply the number of ounces by this conversion factor. In this case, 101.442 ounces multiplied by 0.0296 liters per ounce gives us approximately 3 liters. Therefore, if you have purchased 101.442 ounces of soda, you have purchased approximately 3 liters.

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• 46.

• A.

\$19.35

• B.

\$25.35

• C.

\$23.35

• D.

\$21.35

C. \$23.35
• 47.

### A three-liter bottle is half full. How many ounces are left?

• A.

45.873

• B.

48.873

• C.

52.873

• D.

50.721

D. 50.721
Explanation
The answer 50.721 is obtained by converting the volume of the three-liter bottle to ounces. Since there are 33.814 ounces in a liter, the three-liter bottle contains 101.442 ounces. As the bottle is half full, there are 50.721 ounces left.

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• 48.

### You pay your credit card bill. This transaction requires you to

• A.

Debit the Liability (credit card bill) and credit the Asset (cash)

• B.

Debit Cash and the Credit Card Bill

• C.

Credit Cash and the Credit Card Bill

• D.

Write off the debt only

A. Debit the Liability (credit card bill) and credit the Asset (cash)
Explanation
When you pay your credit card bill, you need to debit the Liability (credit card bill) because you are reducing the amount you owe to the credit card company. At the same time, you need to credit the Asset (cash) because you are using your cash to make the payment. This transaction reflects a decrease in your liability and a decrease in your cash asset.

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• 49.

### A person or institution that holds or generally manages the property is the

• A.

Trustee

• B.

Tenant

• C.

Heir

• D.

Executor

A. Trustee
Explanation
A trustee is a person or institution that holds or generally manages the property. They are responsible for ensuring that the property is used and managed in accordance with the wishes and best interests of the beneficiaries. They have a fiduciary duty to act in the best interests of the beneficiaries and are often appointed to manage assets in a trust or estate.

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• 50.

### The person who rents an apartment is the

• A.

Trustee

• B.

Tenant

• C.

Manager

• D.

Lessor

B. Tenant
Explanation
The correct answer is tenant because a tenant is someone who rents an apartment or property from a landlord or lessor. They have the right to occupy the premises for a specified period of time and are responsible for paying rent and following the terms of the lease agreement. The other options, such as trustee, manager, and lessor, do not accurately describe the person who rents an apartment.

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• Current Version
• Jan 17, 2024
Quiz Edited by
ProProfs Editorial Team
• Jan 09, 2020
Quiz Created by
Tiffany

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