CPF study extra

Joseph needs to complete his income taxes for the year. He has already calculated his adjusted gross income. What does he need to do next?

Subtract his itemized deductions.

Income that is taxed at a later date is

Tax-deferred income.

Income that is not subject to tax is called

Tax-exempt income.

The consumer price index measures:

The average change in prices of a fixed basket of goods and services of urban consumers

Sam is comparing the costs of two loans. The principal amount of each loan is $5,000. One is due in one year and the other is due in four years. Both have the same stated rate of annual interest. Which of the following is true?

The interest charges for the one-year loan will be lower than the interest charges for the four-year loan.

A line of credit is

The maximum dollar amount of credit the lender has made available to a borrower.

Jim Johnson was laid off from his job two months ago. He just received an offer for a position that pays 3/4 the salary of his old job. Why should he set up a financial plan?

To increase the effectiveness of obtaining, using, and protecting his financial resources.

An example of an excise tax is Social Security.

false

An organized system of financial records provides a basis for reducing credit card usage.

false

Consumer credit may allow businesses to be more efficient or more productive.

false

Contributions to a Keogh or 401(k) are tax-exempt.

false

Federal income tax returns must be filed by April 1 of each year.

false

Financial advisers suggest that an emergency fund should cover one to two months of living expenses.

false

If your tax payments are less than the amount of income tax you owe, you are entitled to a refund.

false

In the five Cs of credit, capital refers to the borrower's ability to pay additional debts.

false

In the five Cs of credit, conditions refer to what will happen if the borrower does not repay the loan.

false

Interest earned is calculated by multiplying the principal times the time value of money.

false

One of the best tax shelters is owning a car.

false

Service contracts on vehicles usually are wise financial decisions.

false

Small claims court is used to take legal action by a few individuals on behalf of all who have suffered the same alleged injustice.

false

Some people keep various documents and valuables in safe deposit boxes in banks and other financial institutions because the safety of the contents of these boxes is absolutely foolproof.

false

Tax rate schedules list average tax rates.

false

The add-on interest calculation uses this formula: Interest = Principal × Rate of interest × Time.

false

The average tax rate is the tax paid on the next dollar of taxable income.

false

The debt-to-equity ratio is calculated by dividing your total liabilities, including your mortgage, by your net worth.

false

The two personal financial statements that you create yourself are the personal balance sheet and a credit card payoff statement.

false

When creating a budget, it is important to save the amount you have left at the end of the month.

false

You have a legal right to sue a credit bureau if you observe an error in your file.

false

Problem identification is part of the ____ phase of the research-based buying process.

pre shopping activities

When creating a budget, it is important to

"Pay yourself first" by setting aside savings before other expenses are budgeted.

If Diane was in a 25% tax bracket and received a $1,000 tax credit, by how much would her taxes be reduced?

$1,000

If Melinda Miller estimates that her $100 weekly grocery bill will increase at an annual inflation rate of 4%, what should her weekly grocery bill be in 3 years?

$112.50

If a $10,000 investment earns a 7% annual return, what should its value be after 6 years?

$15,010

If you deposit $500 into a Certificate of Deposit earning 3%, what would be your earnings after 12 months?

$15.00

Using the following table, calculate the taxes for an individual with taxable income of $20,800.

$2,695.

If Vince charged $200 on his credit card with 18% APR and he paid his balance in full within the grace period, how much was he required to pay?

$200.00

Rebecca Wilson budgeted $395 for a new wardrobe in June. She actually spent $425. What is her budget variance?

$30 deficit

Rebecca Wilson budgeted $1,200 for housing and utilities in July. She actually spent $1,160. What is her budget variance?

$40 surplus

Gross income less Adjustments to Income equals

Adjusted gross income.

Which of the following can result from a failure to repay a loan?

All of the above may result from the failure to repay a loan.

Which of the following is a liquid asset?

All of these are liquid assets

Which of the following is NOT a valid credit application question?

All of these are valid credit application questions.

A direct loan for personal purposes, home improvements, or vacation expenses is called

An installment cash credit.

Which of the following situations describes a person who could be insolvent?

Assets $40,000; liabilities $55,000

The equation to calculate net worth is

Assets minus Liabilities = Net worth.

Items that you own that have a monetary value are referred to as

Assets.

Another name for a statement of financial position is a

Balance sheet

While Paul was shopping for a new chainsaw, he found a great deal on a new drill and bought it. This is an example of

Impulse shopping.

Lauren owns her business and is thinking about saving for retirement. She wants to invest up to 25% of her annual income. Which plan should she use?

Keogh plan

Increased consumer saving and investing is likely to be accompanied by

Lower interest rates

Information about a personal bankruptcy may be reported in your credit file for

10 years

Peter filed his federal income taxes, but he needs to make a correction to his income. Which form should he use?

1040X

At the end of the year, Walter received a form that showed his payments from independent contracting. That form is called a

1099

George Franklin paid taxes of $4,375 on a taxable income of $32,000. What was his average tax rate?

13.7%

Place the following steps for a personal financial plan in the proper order: 1. Review and revise the financial plan 2. Identify alternative courses of action 3. Create and implement your financial action plan 4. Determine your current financial situation 5. Evaluate alternatives6. Develop your financial goals

4, 6, 2, 5, 3, 1

If inflation is expected to be 8 percent, how long will it take for prices to double?

9 years

Evan is not concerned about immediate tax benefits but instead wants his investment to grow in value on a tax-free basis. Which of these would be the best for him to invest in today?

A Roth IRA

Which of the following is an example of open-end credit?

A department store credit card

Which of the following is an example of closed-end credit?

A mortgage loan.

The document that would be most useful to plan spending and saving to achieve financial goals is the

Budget.

Jennifer is thinking about leasing a sports car. She will make monthly payments based on a money factor and the price of the vehicle, which is called the

Capitalized cost.

The document that would tell you what you received and spent over the past month is the

Cash flow statement.

Personal bankruptcy can be filed under which section(s) of the U.S. bankruptcy code?

Chapters 7 and 13

Molly purchased a $1,500 dishwasher from Best Appliances. She will make 12 equal payments over the next year to pay for it. She is using

Closed-end credit.

Annie was required to clarify or document minor questions about her tax form by a mail inquiry. She participated in a(n)

Correspondence audit.

A service contract

Covers the repair costs of a product.

_________ goals relate to infrequently purchased, expensive tangible items.

Durable-product

When calculating federal income taxes, "gross income" includes all of the following except

Earned income credit.

The actual cost of living increase for a household will be:

Either greater than or less than the inflation rate as reported by the CPI depending on the household's cost of necessities purchased

A tax imposed on the value of a person's property at the time of death is called a(n)

Estate tax.

Which of the following is NOT one of the three major credit bureaus?

FICO

An IRS agent visited Henry's home to verify some information on his tax return. This visit was called a(n)

Field audit.

An example of a fixed expense is

Home rental payment.

This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels.

Income tax

Which of the following best describes the concept of the time value of money?

Increases in an amount of money as a result of interest earned.

The amount levied on the value of property bequeathed by a deceased person is

Inheritance tax.

Which of the following long-term goals is stated most clearly using the SMART approach?

Invest $50 per month for the next 12 years for my nephew's college fund Correct

The dealer's cost is also known as the

Invoice price.

A personal balance sheet reports

Items owned, amounts owed, and your net worth.

The rate used to calculate the tax due on the next dollar of income is referred to as the

Marginal tax rate.

Take-home pay is also called

Net pay.

A worker's primary goal should be to

Pay his or her fair share of taxes while taking advantage of appropriate tax benefits.

Which of the following are two personal financial statements that you create yourself?

Personal balance sheet and cash flow statement

Which of the following intermediate goals is stated most clearly using the SMART approach?

Purchase a house within the next 5 years with a mortgage no greater than $150,000 Correct

The expected value of a vehicle at the end of a lease is called the

Residual value.

When creating a personal balance sheet, which of the following is an investment asset?

Retirement account such as a 401k Correct

Price analysis is part of the ____ phase of the research-based buying process.

evaluating alternatives

Using the following table, calculate the taxes for an individual with taxable income of $30,000.

Using the following table, calculate the taxes for an individual with taxable income of $30,000.

When creating a personal balance sheet, which of the following is a real estate asset?

Vacation property

Which of the following appears as a cash outflow on a cash flow statement?

Variable expenses

At the end of the year, employees receive a ____ form that reports annual earnings and the amounts deducted for taxes from their employers.

W-2

Before buying goods and services on credit, a consumer should consider all of the following except

Whether the good or service will be worth more because it was purchased with credit instead of cash.

You may be required to make estimated tax payments if

You are an independent contractor.

The difficulty of converting savings and investments to cash is referred to as ____________ risk.

liquidity

A balance sheet reports what an individual or family owns and owes.

true

Cash and prizes won on television game shows are subject to both federal and state taxes.

true

Every taxpayer receives at least the standard deduction, a set amount on which no taxes are paid.

true

For 2017, the seven-rate system for federal income tax ranges from 10% to 39.6%.

true

When Marissa completes her taxes, she can include her qualified dependent children, her husband, and herself as exemptions.

true

When prices are increasing at a rate of 4 percent, the cost of products would double in about 18 years.

true