Personal Finance Ch. 4

The competence or legal ability of a person to enter a contract is called consideration.

false

You should always create a monthly budget--weekly or biweekly budgets tend to be inaccurate.

false

___ expenses are costs that do not change from month to month.

fixed

Which of the following is a variable expense?

grocery bill

Money or debts you owe to others are called

liabilities

A person who creates and signs the promissory note and agrees to pay it on a certain date is called the

maker

When one person makes an offer and another person changes it, the second person is

making a counteroffer

The word ___ means legally collectible.

negotiable

Assets minus liabilities equals

net worth

A computer program that organizes data in columns and rows and can perform calculations using the data is called a

spreadsheet

A court will not require a person to perform an agreed-upon act if it is illegal.

true

A net worth statement will be useful when you apply for a loan or credit.

true

Before you prepare a budget, it is a good idea to keep track of your income and expenses for a month or two.

true

If a person signs a contract because he or she felt threatened to do so, a genuine agreement does not exist.

true

One big advantage of computerized record keeping is that information can be updated pretty quickly and easily.

true

The two elements to consider in budgeting and planning are your income and your expenses.

true

When assets are greater than liabilities, you are said to be solvent.

true

You should never sign a contract until you read and understand all of its terms.

true

___ expenses are costs that vary in amount and type depending on the choice you make.

variable

A ___ or guarantee is a statement assuring quality and performance of a product or service.

warranty

Use the following information to calculate Diana's net worth: ​ Savings account: $2,500 Checking account: $400 Car value: $5,000 Personal property value: $5,500 Loan for vacation: $2,000 Loan from grandparents: $250

$11,150

Use the following information to calculate Diana's liabilities: Savings account: $2,500 Checking account: $400 Car value: $5,000 Personal property value: $5,500 Loan for vacation: $2,000 Loan from grandparents: $250

$2,250

Use the following figures to find Barney's expenses for June: Part-time job salary (after taxes): $300 Allowance for household chores: $25 Birthday check from parents: $25 Savings: $100 Cost of new shirt and pants: $80 Cost of two movies: $20 Cost of daily lunches: $100

$200

Use the following figures to find Barney's income for June: Part-time job salary (after taxes): $300 Allowance for household chores: $25 Birthday check from parents: $25 Savings: $100 Cost of new shirt and pants: $80 Cost of two movies: $20 Cost of daily lunches: $100

$350

The Girard family decides to save 10 percent of their income each month. If their monthly income is $4,000, how much will they save over the course of one year?

$4,800

The IRS has the legal right to audit your tax returns and supporting records for ____ years from the date of filing.

3

Most financial experts recommend that a family have fixed expenses of no more than

50 to 60 percent of net pay

Which of the following would be considered an asset?

a checking account

Which of the following contracts must be signed to be legally binding?

a contract involving the sale of a farmhouse

A spending and saving plan based on your expected income and expenses is called a

budget

Something of value exchanged for something else of value is called

consideration

A legally enforceable agreement between two or more people is called a

contract

Your ___ income is the money you have left to spend or save after taxes and other required deductions are taken.

disposable

When preparing a budget, you need to focus mostly on your

disposable income

In a balanced budget,

expenses+savings=earnings+borrowing

A payee is a person who promises to pay the debt of another person.

false

A set of goals for spending, saving, and investing the money you receive is called a budget.

false

An express contract is legally binding, but an implied contract is not.

false

In the short-run, fixed costs are easier to change than variable costs.

false

Only people with considerable wealth need to create a personal record keeping system.

false