Personal Finance exam 1

______ would be considered a financial asset

(disney) stock

medical expenses

anything over 10% of AGI

as the rate of inflation increases, the purchasing power of your dollars will

decrease

if your expenses exceed your income, the bottom line of you income/expense statement will show a

defecit

interest you paid on your _______ loan could be taken as an itemized deduction on your tax return

house

The amount of money we set aside for future consumption will be determined by

how much we currently earn and spend

having numerous credit cards can _____ your credit score

hurt

if you pay off your debt but make no changes in your assets, your net worth will

increase

when your liabilities exceed your assets, you are

insolvent

you will have to list and be able to prove _____ deduction if audited

itemized

Investments are distinguished from savings on the basis of

level of risk and expected return

a liability would be listed on a personal balance sheet as the _______

liabilities are not on the balance sheet as amount originally borrowed, or the amount of the next loan payment to be made

chad borrowed $3500 from his parents last fall, but so far, has made no payments to them

liability

On june 21, 2016 chad bought diamond earrings for his wife and charged them to his master card, the earrings cost 900 and he hasn't yet received the bill

liability cause its money owed asset because jewelry can be assets

_____ expenses would be more difficult to estimate for the coming year

medical

job related expenses

over 2% AGI

_____ value is the value today of an amount to be received in the future

present

inflation refers to

rising prices

______ of your medical expenses during the year could be taken as an itemized deduction

some

a tax credit is subtracted from your

tax liability

as the rate of inflation increases

the purchasing power goes down

you bought your car for 4000 and the balance of the loan against it now is 2500. you will list the car in the asset section of your personal balance sheet as

4000

rob requests that a gps system be added to his new car at an additional cost, the gps system provides rob

additional utility

home mortgage interest

all

state property taxes

all

charitable contributions

all up to 50% of AGI

Chad rents a house for $1350 a month

expense

chad makes monthly payments of $225 on an installment loan, about half of it is interest and the balance is repayment of principal

expense (loan payment)

chad invested $2300 in some common stock

expense and asset

As a single taxpayer with no dependents, one is generally eligible to file as "head of household."

false

Income tax refunds are automatically sent to those who qualify for refunds no later than April 15.

false

a budget is a detailed statement of what income and expenses occurred over a past period

false

a home and land should be recorded on the personal balance sheet at their original cost

false

an income and expense statement deficit would increase net worth

false

if you are married you can legally file a single tax return

false

the balance sheet equation is assets plus liabilities = net worth

false

the federal personal income tax is a flat rate

false

the income and expense statement looks forward in time, while a budget is backward looking

false

A charge made on your credit card becomes a liability as soon as the charge is incurred.

true

Russ and Lois got married December 30. Since they were single for most of the year, however, they can legally file as married taxpayers in the year of the wedding.

true

defining financial goals is an important first step in the financial planning process

true

money can be withdrawn from tax deferred retirement accounts without penalty beginning at age 59 1/2

true

mutual funds are examples of financial assets

true

the liquidity ratio is an indicator of a family's ability to pay current debts if there is an interruption in income

true

when the income and expense statement indicates a cash surplus this may be used to increase net worth by increasing assets or decreasing liabilities

true

_______ would be considered a tangible asset

your car (something that is physically there)