bus chapter 4

Your bank statement shows a balance of $695. Your checkbook register shows a balance of $562. You earned interest of $3 and had a service charge of $5. There are no outstanding deposits. What is the amount of outstanding checks?

$135

Based on the following information, what amount would be subtracted from the bank statement side of the bank reconciliation? ATM withdrawal $20; Outstanding checks $154; Interest $1.25; Deposit in-transit $75.

$154

Ayoki Hideaki is single and earns $32,000 in taxable income. He uses the following tax

$3,641

John Garcia had earnings from his salary of $32,000, interest on savings of $200, a contribution to a traditional individual retirement account of $1,200, and dividends from mutual funds of $125. John's adjusted gross income would be:

$31,125

A $200 savings account that earns $8.50 interest in a year has a yield of ... percent

$4.25

Ms. Romano is a single mom with three children who live at home. She earned less than $40,000 in 2020. What is the maximum amount of earned income tax credit that she may qualify for?

$6,431

Approximately what percent of tax filers are audited each year?

1%

iles Greenwood is single and earns $40,000 in taxable income. He uses the following tax rate schedule to calculate the taxes he owes.

11.5%

Series EE bonds continue to earn interest for how many years?

30

Which one of the following is a tax-deferred retirement plan sponsored by an employer?

401(k) plan

One type of education savings plan is the:

529 plan

The baby boom generation currently represents about 30 percent of the population but holds nearly ... percent of the outstanding debt.

60%

Which CD starts with a higher rate, has a long time to maturity, and can be closed by the bank after a set time period?

Callable

The Federal Trade Commission enforces the:

Fair Debt Collection Practices Act

The pay-as-you-go system requires:

Having federal income tax deducted from your paychecks

Which of the following is a drawback of a money market fund from an investment company?

Not covered by FDIC insurance

Which of the following is not a "High-Cost Financial Service Provider"?

P2P lending intermediaries

temized deductions are recorded on:

Schedule A

Which type of audit is the simplest and most common for taxpayers?

a correspondence audit

Which of the following statements regarding debit and credit card liability is correct?

a debit card carries more risk of loss than a credit card

Which one of the following people is least likely to have to file a federal income tax return?

a single person earning less than 5000

Which statement is true regarding a tax credit?

a tax credit reduces the amount of taxes owed

minimize taxes owed, you should do which of the following if you expect to have a higher tax rate next year?

accelerate the receipt of income into current year

Reductions from gross income for such items as individual retirement account contributions and alimony payments will result in:

adjusted gross income

Taxpayers with high incomes and high amounts of certain deductions may be subject to an additional tax referred to as the ... tax

alternative minimum

Which of the following types of financial service providers are insured by federal government agencies?

banks, credit unions, and savings and loan associates

A ... endorsement would be used if a person is presenting a check in person to obtain cash.

blank

Interest rates charged by a pawnshop:

can range from 3-100%

A bank that is looking at your past payment records on your loans is most likely examining which aspect of the 5 Cs of lending?

character

Demand deposits are another term for:

checking accounts

When more than one payment is made on a simple interest loan, the method of computing interest is known as the:

declining balance method

To minimize taxes owed, you should do which of the following if you expect to have a higher tax rate next year?

delay deductions until next year

In the banking industry, checking accounts are frequently referred to as ... deposits.

demand

Factors that affect a person's filing status include marital status and:

dependents

The profits from a mutual savings bank go to the:

depositors

Money received by an individual for personal effort is classified as ... income.

earned

Which one of the following is included in gross income?

earned income

Which one of these statements correctly applies to a Roth IRA?

earnings on the account are tax free after 5 years

Which one of these statements correctly applies to a Roth IRA?

earnings on the account are tax free after five years

Which type of debt would not be forgiven in a straight bankruptcy?

education loans

The Check Clearing for the 21st Century Act (known as Check 21) shortens the processing time for deposited checks by:

establishing the substitute check

he state of Oklahoma imposes a tax of $0.17 per gallon on gasoline. What type of tax is this most likely to be?

excise tax

Which is true of investing in Series EE U.S. Savings Bonds?

federal income tax on earnings may be deferred until the bonds are redeemed

Elaine's Embroidery Emporium which is run out of Elaine's home is visited by an IRS agent who wants to verify the office expenses Elaine claims are valid. What type of IRS audit is this?

field audit

Kiandra Tyler expects interest rates to decline over the next few months. To achieve her long-term financial goals, she will trade off liquidity for a higher return by using a:

five year certificate of deposit

Series EE U.S. Savings Bonds can be purchased:

for any amount above $25

For 2020, which form would a married individual with less than $100,000 in taxable income use to file his federal income tax return?

form 1040

A short-term capital gain is profit earned on an investment that is:

held for less than a year

The interest is deductible on your tax return for which of the following?

home equity loan

Which of the following represent the use of credit?

home mortgage

Which CD pays earnings based on the stock market?

indexed

One common type of closed-end credit is:

installment of cash credit

Money received in the form of dividends or interest is commonly called:

investment income

Which one of the following is true for an interest-earning account?

it usually requires a minimum balance

Tobias Moran owns a fishing boat. His state imposes an annual 3.25 percent tax on the current value of this boat. What type of tax is this most likely to be?

personal property tax

Capital gains refer to:

profits from the sale of a capital asset

What type of account would be considered the most liquid?

regular savings account

Which one of the following is a retirement plan that commonly (age and higher income notwithstanding) allows a $6,000 annual contribution with tax-free earnings after five years?

roth ira

What type of account would you expect to provide the poorest yield?

savings account earning 4% compounded annually

Time deposits are another name for:

savings accounts

One of the most frequently overlooked tax deductions is:

student loan interest paid by parents

In the bank reconciliation process, ATM withdrawals should be:

subtracted from the checkbook balance

Mr. and Mrs. O'Carroll want to give their son, Liam, a total of $30,000. They each write him a check for $15,000 so they won't have to pay any gift tax. This is an example of:

tax avoidance

Which one of these terms is defined as the use of legitimate methods to reduce one's taxes?

tax avoidance

An IRA, Keogh plan, and 401(k) plan are examples of:

tax deferred retirement plans

Tax-deferred retirement plans are a type of:

tax shelter

Which one of the following is not true for PayNearMe transactions?

the customer does not receive a receipt

Tamara Lock is 55 years old, divorced, and has worked at her current job for five years. She is interested in looking at her credit report. Which of the following pieces of information should she find in this report?

the outstanding balance she has on the visa card she has today

The storage of funds for future use is a purpose of ... , which include savings accounts and certificates of deposit.

time deposits

Which of the following is not a valid reason for using credit?

to pay for everyday livings expenses

The purpose of a "special endorsement" is to:

transfer a check to another person

A debit card transaction is processed by a retailer, with the amount of purchases deducted from your checking account by:

transferring money electronically

What is the term used to refer to the yield on a long-term (20-year) debt obligation issued by the U.S. government?

treasury bond rate

A loan origination fee is what the lender charges for the loan and may include processing the application, underwriting, funding, and other administration costs.

true

In a Chapter 13 bankruptcy, the debtor normally keeps all or most of his or her property.

true

The annual percentage rate is the percentage cost (or relative cost) of credit on a yearly basis.

true

The fairest method of calculating interest on a credit card is the average daily balance method.

true

Which one of the following will help to avoid identity theft?

use password involving both letters, special characters, and numbers

Savers should do which of the following in times of falling interest rates?

use short term loans to take advantage of lower rates when you refinance loans

Earned income is money received from:

wages

Which of the following is a way to reduce ATM fees?

withdrawal larger amounts rather than making several smaller withdrawals

The rate of return on a savings account is also referred to as:

yield

Which law requires financial service providers to disclose fees, the interest rate, the annual percentage yield, and the other terms and conditions on savings account plans?

Truth in savings law

A certificate of deposit usually has:

a penalty for early withdrawal of funds

What type of tax is imposed on the value of an individual's property at the time of his or her death?

estate

Evita Obregon is a U.S. citizen that worked in Mexico for part of the year and earned $50,000 while she was there. This foreign earned income will not be included in her gross income for the year. This represents a tax:

exclusion

Which of the following would not be included in gross income?

exclusions

There are no costs involved in filing for a bankruptcy.

false

Andre Miller earns $4,500 per month from his job at Cisco Systems; $900 is withheld from this amount each month for taxes. What type of tax is this most likely to be?

income tax

Taxable income is used to compute the amount of:

income tax owed

A common service offered by investment companies is:

money market funds

Which of the following institutions is organized primarily to provide loans to purchase homes?

mortgage company

Which one of these investments produces tax-exempt income?

municipal bond

Automatically buying a new CD upon maturity of the current CD is commonly referred to as:

rolling over

Noah Holmes deposited $2,500 in a 3-year bank certificate of deposit which pays six percent interest. What type of financial service is Noah using?

savings service

Lorenzo Reyes purchases a big screen TV on credit and will repay the loan with one payment at the end of 90 days. What type of credit did Lorenzo use?

single lump sum credit

Theo Roth has adjusted gross income of $82,000. During the year, Theo decided he needed a larger home. He purchased a home on a golf course in the same town as his first home. He incurred $6,000 in moving expenses. How much of this can he include as an itemized deduction?

$0

A tax credit of $100 for a person in a 24 percent tax bracket would reduce a person's taxes owed by:

$100

Anita Walsh is considering an additional charitable contribution of $1,500 to a tax-deductible charity, bringing her total itemized deductions to $16,000. If Michele is in a 24 percent tax bracket, how much will this $1,500 contribution reduce her taxes?

$360

Harlan Manning is 55 years old, and has adjusted gross income of $40,000. He has medical expenses for the year ending 2020 of $7,000. How much of these expenses can he include as an itemized deduction?

$4,000

Yao yang starts the month with a balance on his credit card of $800. On the 10th day of the month, he purchases $200 in clothes with his credit card. On the 15th day of the month he makes a payment on his credit card of $300. The bank charges 1.5 percent interest per month using the adjusted balance method (and excludes new purchases). What would Yao's finance charges be for the month?

$7.50

A taxable investment produced interest earnings of $1,200. A person in a 22 percent tax bracket would have after-tax earnings of:

$936

Pearl deposited $1,000 in an account paying 2 percent interest. The inflation rate is 5 percent. What is the buying power of the account after one year?

$970

Which one of the following will help to avoid identity theft?

avoid sharing personal information on social media

In recent years, membership in credit unions has:

become more flexible

Which is a CD that offers a higher rate at set intervals, such as every six months you are invested?

bump up

The borrower's financial ability to meet credit obligations is called:

capacity

A saver will usually receive higher earnings with which one of the following types of savings plans?

certificate of deposits

A personal check with guaranteed payment is called a:

certified check

Which one of the following is most likely to qualify as an itemized deduction?

charitable contributions

Which type of organization does not provide home mortgages?

check cashing outlets

Examples of tax credits do not include a(n) ... tax credit.

credit card

Which federal consumer credit law requires issuers to display on monthly statements how long it would take to pay off the existing balance and the total interest cost if the consumer paid only the minimum due?

credit card accountability, responsibility, and disclosure act

A higher rate of return would result from a savings account that had which of the following compounding frequencies?

daily

What is the rate that the Federal Reserve banks charge financial service providers for loans called?

discount rate

Estimated quarterly tax payments must be made by people who:

do not have taxes withheld from their paychecks

Mya Yates wants her tax return prepared by a government-approved tax expert. Which of the following tax preparers should Mya use?

enrolled agent

Vivian Reid just died. At the time of her death the total value of her assets was $150,000. The federal government collected $7,500 in taxes based on this value. What type of tax is this most likely to be?

estate tax

Peter Marsh claimed an additional $3,000 in deductions he knowingly knew he did not qualify for so he could reduce his tax bill. This is referred to as tax:

evasion

Which type of tax is imposed on specific goods and services, such as gasoline and cigarettes, at the time of purchase?

excise

A person filing for relief under the bankruptcy code is called bankrupt, not a debtor.

false

The Fair Debt Collection Practices Act regulates the ways debt collection agencies do business.

false

The most basic method of calculating interest is the compound interest calculation.

false

You can deduct the interest paid on consumer loans on your income tax return.

false

The principal purpose of taxes is to:

finance government activities

Lorenzo Turner goes into a local department store and purchases a new suit. He pays $48 in taxes on this purchase. What type of tax is this most likely to be?

general sales tax

Reynaldo Mendez wants to buy a new sail boat. He is planning on making a $9,000 cash down payment, which is a large portion of the cost of what he is financing. In which way is Reynaldo reducing his lender's risk?

he is taking a higher stake in the asset he is purchasing

Which one of the following would reduce gross income to obtain adjusted gross income?

ira contributions

... are expenses that a taxpayer is allowed to deduct from adjusted gross income.

itemized deductions

Which of the following has the main purpose of issuing a policy that provides financial security for dependents?

life insurance company

Which one of the following would not be considered closed-end credit?

line of credit from your bank

An advantage credit unions may have over other financial service providers is:

lower loan rates

A person who owes total federal income taxes of $3,450 but had total withholdings of $3,125 would:

make a payment of $325

A trust has the purpose of:

managing the assets of a person

Which one of the following savings plans is not covered by federal deposit insurance?

money market fund with an investment company

In 2020, the Form 1040 is not appropriate for someone who:

no taxable income and no tax withheld

Union dues, tax preparation fees, and other miscellaneous expenses are:

not deductible

An exclusion affects a person's taxes by:

not including tax-exempt income in gross income

What kind of audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return?

office audit

According to a consumer affairs columnist, the nation's number one family financial problem is:

overindebtedness

Which one of the following is often the source of the least expensive loan?

parents or family members

A tax on the value of automobiles, boats, or furniture is referred to as:

personal property tax

... may involve an official-looking (but phony) letter or email sent to a taxpayer to trick them into disclosing personal information and bank account numbers by stating that the taxpayer is entitled to a tax refund from the IRS.

phishing

What is the rate that banks charge large corporations for loans called?

prime rate

Which CD attempts to attract savers with gifts or special rates?

promotional

A taxpayer whose spouse recently died and who has a dependent is most likely to use the ... filing status.

qualifying widow or widower

The best way to maintain your credit standing is to:

repay your debts on time

A limit on the amount you must keep on deposit in a checking account in order to earn interest or avoid a service charge is an example of a(n):

restriction

A ... endorsement consists of the words "for deposit only" followed by your signature and account number and is especially useful when you are depositing checks.

restrictive

A regular savings account at a credit union is called a ... account

share

When interest rates are rising, a person should select:

short term saving instruments

Which one of the following items is a set amount of income on which no taxes are paid?

standard deduction

Tariq Salah has set up a legal agreement that allows the First State Bank of Orlando to manage funds set aside for his daughter's college education. What type of financial service is Tariq using?

trust service

Which federal consumer credit law regulates the advertising of credit terms?

truth in lending act

Which of the following good or service is subject to an excise tax?

(all of the above) cigarettes, gasoline, tires, and air travel

Smart cards with an embedded chip are used for banking transactions and may also store:

(all of the above) medical history, insurance information, past purchases, and personal data

An asset management account typically offers the following service:

(all of the above) online banking, checking account, a line of credit, and mobile apps

Video teller machines (VTMs) provide which of the following banking services?

(all of the above) personalized service after bank branch hours, answer specific account questions, and face-to-face connection to bank representative

Prepaid debit cards are used for:

(all of the above) social security benefits, school lunches, highway tolls, and telephone service

Prepaid debit cards are used for:

(all of the above) social security benefits, school lunches, highway tolls, and telephone service,

Effective personal tax strategies include:

(all of the above) taking advantage for tax credits for which you qualify, considering tax exempt investments such as municipal bonds, searching out all possible itemized deductions, and maxing contributions to deferred retirement programs

Mature consumers have certain information and:

(all of these choices are correct) they demonstrate self discipline, they control their impulses and use sound judgement, they accept responsibility for money management, and they are able to postpone expenditures when needed

The "head of household" filing status is for someone who is:

unmarried and has a dependent child

The standard deduction is a set amount on which no taxes are paid. For 2021, single people receive a standard deduction of:

$12,550

If you borrow $150 at 10 percent interest, how much will you repay in one lump-sum at the end of one year using simple interest?

$165

The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution. Suzanne has $520,000 in a joint account with her husband, Ted. How much is not covered by FDIC insurance?

$20,000

Min Soo-Yun bought 20 shares of stock two years ago. She recently sold her stock making a profit of $1,400. Long-term capital gain rates are 15 percent for her income level. She is in the 22 percent tax bracket. Her tax on this investment is:

$210

An itemized deduction of $800 with a 33 percent tax rate would reduce a person's taxes by:

$264

Sonja Nayak has adjusted gross income of $40,000. She paid $4,700 in property taxes during the year. How much of the tax can she include as an itemized deduction?

$4,700

The tax on $2,000 of profit on a capital asset is deferred. A person in a 24 percent tax bracket will have to pay what amount of taxes when the asset is sold?

$480

During the COVID-19 pandemic, the rapid increase in the use of digital and mobile banking applications was beneficial for:

(all of the above) social distancing, contactless transactions, and enhanced mobile banking experience

A taxpayer with a taxable income of $45,328 and a total tax bill of $5,911 would have an average tax rate of ... percent.

13.04%

A savings account earns 3 percent. If the saver is in a 22 percent tax bracket, the after-tax savings rate of return would be ... percent.

2.34%

Determine the rate of return on a savings account in which you deposited $200.00 and earned $5.00 in interest after one year.

2.5%

The Tax Cuts and Jobs Act allows owners of a sole proprietor or partnership to deduct up to ... percent of the income earned by the business from their individual return to arrive at taxable income beginning in 2018.

20%

Aida Hassen is single and earns $40,000 in taxable income. She uses the following tax rate schedule to calculate the taxes she owes.

22%

A person has $5,000 in medical expenses and an adjusted gross income of $33,000. If taxpayers are allowed to deduct the amount of medical expenses that exceed 7.5 percent of adjusted gross income, what would be the amount of the deduction in this situation?

2525

According to Fair Isaac Corporation (FICO), a personal bankruptcy can cause an immediate drop in your credit score of how many points?

260

A person borrows $100 from a payday loan company, and pays $10 interest for two weeks. This would result in an annual interest rate of approximately ... percent. Ignore compounding.

260%

Dorian Roberts has monthly net income of $1,200. He has a house payment of $550 per month, a car loan with payments of $250 per month, a Visa card with payments of $40 per month, and a credit card with a local department store with payments of $58 per month. What is Dorian's debt payments-to-income ratio?

29%

When a taxpayer's income increases $1,000 and the taxes owed increases from $7,850 to $8,200, the marginal tax rate is ... percent.

35%

The Consumer Financial Protection Bureau receives an average of how many complaints about the credit bureaus every year?

36,000

In recent years, how many states have not had a general sales tax?

5

Although you should generally keep tax records for 3 years from the date you file your return, you may be held responsible for providing back documentation up to:

7 years

Oliver closed on his new home December 31, 2020 instead of January 1, 2021. As a result, Oliver:

accelerated tax deductions in 2020

for tax years prior to 2018, a deduction from adjusted gross income for yourself, your spouse, and qualified dependents was termed:

an exemption

Comparison of earnings for different savings plans can best be accomplished using the:

annual percentage yield

An all-purpose account offered by investment brokers that provides a complete financial services program is a(n):

assest management account

Which of the following types of financial service providers are insured by federal government agencies?

banks, credit unions, and savings and loan associations

Which CD starts with a higher rate, has a long time to maturity, and can be closed by the bank after a set time period?

callable

A loan officer is examining your income and the amount of your existing debt payments and monthly expenses in deciding whether to make a loan to you today. Which aspect of the 5 Cs of lending is the loan officer most likely looking at?

capacity

Which of the following is organized as a corporation and owned by stockholders?

commercial banks

The Federal Deposit Insurance Corporation insures savings plans at:

commercial banks and savings and loan associations

The business hours and ATM locations of a financial institution refer to the ... feature when selecting a financial service provider.

connivence

What is the term used to refer to the cost of borrowing for large U.S. corporations?

corporate bond rate

a tax ... is an amount subtracted directly from the amount of taxes owed.

credit

Which of the following contains new protections for college students and young adults?

credit card accountability, responsibility, and disclosure act

The interest paid on which type of loan is not tax deductible?

credit card interest

Do not make the mistake of trusting which of the following counseling providers that promise to help you clean up your credit report for a fee?

credit repair clinic

Elena Alvarado gets an auto loan from her credit union for $11,500. Elena will make monthly payments over the next five years to repay the loan. What type of financial service is Elena using?

credit service

This type of financial institution is known to frequently offer lower fees and lower loan rates.

credit union

Which of the following is a user-owned, nonprofit, cooperative financial institution?

credit union

Earnings from a limited partnership would be an example of ... income

passive

Which one of the following financial service providers should be avoided, because the interest rates charged on loans can be over 100 percent a year?

pawnshop

Rashad Dixon writes a check to pay for day care for his son. What type of financial service is Rashad using?

payment service

The ... property tax is based on the value of land and buildings.

real estate

Which of the following is a major source of revenue for local governments?

real estate property tax

An expense that would be included in the itemized deductions of a taxpayer is:

real estate property taxes

This type of savings plan is usually considered to be very liquid.

regular savings account