FIN 264 Exam 1 MSU 2017

Liabilities / Net worth

Debt ratio

investment

A retirement account is an example of a ____________ asset.

credit

A tax ____________ is an amount subtracted directly from the amount of taxes owed

$50

A tax credit of $50 for a person in a 28 percent tax bracket would reduce a person's taxes owed by

estate tax

A tax imposed on the value of a person's property upon that person's death is called

12.3

A taxpayer with a taxable income of $47,856 and a total tax bill of $5,889 would have an average tax rate of ____ percent.

Form 1040EZ

A young, entry-level worker with no dependents and income only from salary.

time comparing several brands of personal computers.

An example of a personal opportunity cost would be

Total tax / Taxable income

Average tax rate

when the debt is due.

Current liabilities differ from long-term liabilities based on:

Liquid assets / Current liabilities

Current ratio

Income risk

John Gleason is interested in purchasing a 46" rear projection TV for his living room. He knows that right now the TV will cost approximately $1500. However, John is a little concerned about his job. John is a pilot for Delta Airlines and he thinks it is possible that he could be laid off in the near future. What type of risk is John worried about?

Inflation risk

John Gleason is interested in purchasing a 46" rear projection TV for his living room. John knows that right now the TV will cost approximately $1500. John is not sure he can afford this TV right now but is worried that if he waits, the cost of the TV will rise to $1800. Which type of risk is John worried about?

debts.

Liabilities are amounts representing:

cash and other items that are easily converted to cash.

Liquid assets refer to:

Liquidity risk

Mary Smith is considering investing in 30 year Corporate Bonds issued by Duke Energy Company. She knows that she will earn an interest rate of 8% by purchasing these bonds. However, she is concerned because she might need to take her money out of this investment in a year, and she has heard that she might have to sell the bonds at a significantly lower price than she will purchase them for. What type of risk is Mary concerned about?

Total assets - Total liabilities

Net worth

trade-offs associated with financial decisions

Opportunity costs refer to

fixed

Payments that do not vary from month to month are ____________ expenses

(Ending value − Beginning value) / Beginning value

Rate of increase

Tax liability - Taxes paid

Tax due(refund)

Tax rate × Tax deduction

Tax savings

Adjusted gross income - Itemized deductions - Personal exemptions

Taxable income

income tax.

Taxable income is used to compute a person's

itemizes deductions.

The Form 1040 is most helpful to a person who:

real estate

The ______________ property tax is based on the value of land and buildings at some point in time

Balance sheet and cash flow statement

Which of the following are considered to be personal financial statements?

Mortgage

Which of the following would be considered a long-term liability?

Assets $40,000; liabilities $45,000

Which one of the following illustrates an insolvent situation?

Standard deduction

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

A single person earning less than $10,000.

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

Cash flow statement

Which one of the following presents a summary of cash receipts and payments for a period of time?

Tax avoidance

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

A correspondence audit

Which type of audit is the least complicated for taxpayers?

Present value of a single amount

Which type of computation would a person use to determine the current value of a desired amount in the future?

Excise

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

8

With an inflation rate of 9 percent, prices would double in about ___________ years rule 72

Savings amount × Annual interest rate

Yearly earnings

realistic well planning clearly communicated flexible

a successful budget should be

realistic to achieve have a definite time frame specific and measurable

characteristic of good financial goals

one third

on average, the portion of a person's earning that goes to taxes is

earnings ( salary, wedges, and commission) after deducting for taxes and other items.

take- home pay

$500

A $2,000 deposit to a tax-deferred individual retirement account (IRA) for a person in a 25 percent tax bracket would result in a reduced tax bill of:

Form 1040

A college student who, due to ownership of property, is able to itemize deductions rather than take the standard deduction.

an exemption.

A deduction from adjusted gross income for yourself, your spouse, and qualified dependents is:

$23,000 ( 45000-22000)

A family with $45,000 in assets and $22,000 of liabilities would have a net worth of:

Form 1040A

A high school student with an after-school job and interest earnings of $1,506 from savings accounts.

financial records for current needs.

A home file should be used for:

owe $375.

A person with a total tax liability of $4,350 and withholding of federal taxes of $3,975 would:

items owned and amounts owed.

A personal balance sheet presents:

Do you have an adequate emergency fund?

A question associated with the saving component of financial planning is:

a time frame

Brad Johnson has a goal of "saving $50 a month for vacation." Brad's goal lacks:

higher interest rates

Higher consumer prices are likely to be accompanied by

a lower money supply

Higher interest rates can be caused by:

increased demand by consumers without increased supply.

Higher prices are likely to result from

Future value of a series of deposits

If a person deposited $50 a month for 6 years earning 8 percent, this would involve what type of computation?

Future value of a single amount

If you put $1,000 in a savings account and make no further deposits, what type of calculation would provide you with the value of the account in 20 years?

Tax rate × Taxable income

Income tax

higher employment levels.

Increased consumer spending will usually cause:

increased job opportunities. higher wages. increased consumer spending. overall economic expansion.

Increased home building results in:

balance sheet.

The current financial position of an individual or family is best presented with the use of a:

generate revenue for funding government activities.

The main purpose of taxes is to

net worth

The value of items owned minus the amounts owed to others equals

Income tax - Tax credits

Total tax liability