CYAF 222 Question Bank

What is one difference between an accountant and an auditor?

Auditors assess the accuracy of the firm's financial statements.

C

53. Fred has been completing his own tax returns for years. The IRS has recently contacted him with questions about some of his prior returns. How many years back is he responsible for providing documentation? A. Until he files his returns. B. 3 years. C. 6 years. D. 10 years. E. 15 years.

E

54. When Paul completes his taxes, he can include all of the following as exemptions except A. His 12-year-old son. B. Himself. C. His 22-year-old daughter who is a full-time student. D. His wife. E. His 20-year-old son who is working full-time and living in an apartment.

Standardization of credit figures (total fin ace changer in dollars and the annual percentage rate of interest) is required by the

truth in lending act

a point as defined in the real estates market, is (blank) percent of the loan amount

1

the dealer cost of new cars average about (BLANK) percent lower than the sticker price

12

D

30. A worker's primary goal should be to A. Pay his or her taxes using estimates for income and deductions. B. Pay no income taxes. C. Pay the average tax rate for people working in his or her industry. D. Pay his or her fair share of taxes while taking advantage of appropriate tax benefits. E. Pay no taxes of any type.

B

31. Which of the following is NOT a tax that most people pay? A. Federal taxes on earnings B. Federal taxes on possessions C. Federal taxes on wealth D. Local taxes on property E. State taxes on purchases

B

32. A tax due on the purchase of gasoline is called a(n) A. Estate tax. B. Excise tax. C. Income tax. D. Real estate tax. E. Inheritance tax.

A

33. A tax imposed on the value of a person's property at the time of death is called a(n) A. Estate tax. B. Excise tax. C. Income tax. D. Real estate tax. E. Sales tax.

C

34. This tax is a major financial planning factor for most people because it is sometimes imposed at the federal, state, and local levels. A. Estate tax B. Excise tax C. Income tax D. Real estate tax E. Sales tax

D

35. The tax that is a major source of revenue for local governments is called a(n) A. Estate tax. B. Excise tax. C. Income tax. D. Real estate tax. E. Sales tax

C

36. Payroll deductions for federal government retirement benefits (such as old age, survivor, and disability insurance) are called A. Estate taxes. B. Excise taxes. C. Social Security taxes. D. Real estate taxes. E. Sales taxes.

A

37. The amount levied on the value of property bequeathed by a deceased person is A. Inheritance tax. B. Excise tax. C. Social Security tax. D. Real estate tax. E. Sales tax.

D

39. You may be required to make estimated tax payments if A. You receive a paycheck with taxes withheld. B. You do not have interest income. C. You are married. D. You own a business. E. All of these are correct.

D

40. When calculating federal income taxes, "income" includes all of the following categories except A. Earned income. B. Alimony. C. Investment income. D. Active income. E. Passive income.

D

41. When calculating federal income taxes, what increases "income"? A. Exclusions B. Tax-exempt income C. Tax-deferred income D. Alimony E. Tax deductions

E

42. Income that is never subject to tax is called A. Adjusted gross income. B. Earned income. C. Foreign income. D. Tax-deferred income. E. Tax-exempt income.

D

43. Income that is taxed at a later date is A. Adjusted gross income. B. Earned income. C. Exclusions from income. D. Tax-deferred income. E. Tax-exempt income.

A

44. Gross income after certain reductions have been made is A. Adjusted gross income. B. Earned income. C. Exclusions from income. D. Tax-deferred income. E. Tax-exempt income.

B

45. Fees, tips, and bonuses are forms of A. Adjusted gross income. B. Earned income. C. Exclusions from income. D. Tax-deferred income. E. Tax-exempt income.

D

46. Total income (gross) includes A. Exclusions from income. B. Tax deductions. C. Tax-deferred income. D. Passive income. E. Tax-exempt income

B

47. 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? A. Add his tax-exempt income. B. Subtract his itemized deductions. C. Add his tax credits. D. Subtract his tax-exempt income. E. Add his tax exemptions.

A

58. The tax designed to ensure that those who receive tax breaks also pay their fair share of taxes is called the A. AMT. B. Average tax rate. C. Income tax rate. D. Marginal tax rate. E. Total tax rate.

D

59. The tax due on the next dollar of income is referred to as the A. AMT. B. Average tax rate. C. Income tax rate. D. Marginal tax rate. E. Total tax rate.

B

60. Tanya is a single low-income working parent, and Fred is a single high-income working parent. Because of her status, Tanya, but not Fred, may be eligible for the A. Alternative minimum tax. B. Earned income credit. C. Itemized deduction credit. D. Student deduction. E. Withholding credit.

B

61. Which of the following is NOT a tax credit? A. Adoption tax credit B. Domestic tax credit C. Earned income credit D. Foreign tax credit E. Retirement tax credit

D

62. Recent tax credits include all of the following except the A. Earned income credit. B. Foreign tax credit. C. Adoption tax credit. D. Graduate learning tax credit. E. Retirement tax credit.

C

63. At the end of the year, employees receive a ____ form that reports annual earnings and the amounts deducted for taxes from their employers. A. 1040 B. 1099 C. W-2 D. W-4 E. Schedule A

C

64. At the end of the year, Xavier received a form from his employer that reported annual earnings and the amounts deducted for taxes. That form is called a A. 1040. B. 1099. C. W-2. D. W-4. E. Schedule A.

B

65. At the end of the year, Yvonne received a form from her bank that reported income from her savings. That form is called a A. 1040. B. 1099. C. W-2. D. W-4. E. Schedule A.

B

66. At the end of the year, Walter received a form that showed his payments from independent contracting. That form is called a A. 1040. B. 1099. C. W-2. D. W-4. E. Schedule A.

E

75. Tax resources include all of the following except A. IRS publications. B. IRS enrolled agents. C. Accountants. D. Attorneys. E. All of these are tax resources.

C

76. Who is ultimately responsible for supplying accurate and complete information for completing a tax return? A. Professional tax preparer B. IRS enrolled agent C. Taxpayer D. Taxpayer's dependents E. Taxpayer's attorney

D

77. An IRS agent visited Henry's home to verify some information on his tax return. This visit was called a(n) A. Correspondence audit. B. Office audit. C. Home audit. D. Field audit. E. Detailed audit

A

78. Annie was required to clarify or document minor questions about her tax form by mail. She participated in a(n) A. Correspondence audit. B. Office audit. C. Home audit. D. Field audit. E. Detailed audit

B

79. If Brenda wants to pay her fair share of taxes, no more and no less, she should practice A. Tax evasion. B. Tax avoidance. C. Tax elimination. D. Tax maximization. E. Tax acceleration.

D

80. Connie thinks that her salary and tax rate for next year will be lower than for this year. What step should she take to minimize her taxes in the current year? A. Accelerate receipt of income. B. Delay deductions. C. Practice tax evasion. D. Accelerate deductions. E. None of these will allow her to minimize her taxes.

C

94. Using the following table, calculate the taxes for an individual with taxable income of $30,000.(tax table is on pdf. file) A. $850 B. $2,125 C. $4,075 D. $4,500 E. $6,025

B

95. Using the following table, calculate the taxes for an individual with taxable income of $45,000.(tax table is on pdf. file) A. $6,025 B. $7,375 C. $8,625 D. $20,900 E. $45,000.

C

96. If Jack was in a 25% tax bracket and received a $1,000 tax deduction, by how much would his taxes be reduced? A. $25 B. $50 C. $250 D. $500 E. $1,000

E

97. If Diane was in a 25% tax bracket and received a $1,000 tax credit, by how much would her taxes be reduced? A. $25 B. $50 C. $250 D. $500 E. $1,000

Opening new checking accounts for customers, preparing certified checks for customers, and processing college loan applications are classified as which type of activity?

Banking

Which of the following is NOT a factor used in the FICO score systems

Homeownership

The true cost of an automobile to the dealer is

None of these

Single payment, open-end, and service credit are lumped together under the category of

Noninstallment credit

to lock-in the mortgage's interest rate is the lender's promise to

Pay interest on money held in escrow

A form of housing ownership where the owner holds legal title to a specific housing unit and a proportionate interest in the common grounds and facilities is

a condonminum

C

38. The maximum amount (in 2010) that an individual can give another in a year without being subject to federal taxes is A. All gifts are taxable. B. $10,000. C. $13,000. D. $15,000. E. No gifts are taxable.

D

48. Adjustments to income include all of the following except A. Alimony payments. B. Contributions to a Keogh retirement plan. C. Traditional IRA contributions. D. Charity contributions. E. Penalties for early withdrawal of savings.

C

49. Individuals can deduct expenses only in excess of 7.5% of adjusted gross income for A. Contributions to charitable organizations. B. Mortgage interest. C. Medical and dental expenses. D. Miscellaneous expenses. E. Taxes.

D

50. Athena wants to determine if she should itemize her deductions. She has identified several possible deductions. Which of the following is NOT a proper deduction? A. Contributions to charitable organizations B. Mortgage interest C. Medical and dental expenses in excess of 7.5% of AGI D. Miscellaneous expenses less than 2% of AGI E. State income taxes

D

51. Shannon is working on her federal income tax form and wants to determine if she should itemize her deductions. She has identified several possible deductions. Which of the following is an acceptable deduction? A. $10,000 gift to her cousin B. Credit card interest C. Medical and dental expenses less than 7.5% of AGI D. Miscellaneous expenses in excess of 2% of AGI E. Moving expenses for a new job that is 25 miles from her old home

B

52. How long are you required to keep tax documentation? A. Until you file your returns. B. 3 years. C. 5 years. D. 10 years. E. 15 years.

C

55. In 2011, taxable income was reduced by ______ for each exemption claimed. A. $1,000 B. $2,500 C. $3,700 D. $5,000 E. $10,000

D

56. In 2011, the U.S. federal tax tables included tax rates of A. 0%, 10%, 20%, 30%, 40%, and 50%. B. 7%, 15%, 30%, 33%, 38%, and 52%. C. 0%, 25%, 50%, and 75%. D. 10%, 15%, 25%, 28%, 33%, and 35%. E. 0%, 5%, 20%, 30%, and 50%.

B

57. The tax based on the total tax due divided by taxable income is called the A. AMT. B. Average tax rate. C. Income tax rate. D. Marginal tax rate. E. Total tax rate.

C

67. Penny knows that she needs to file her federal income taxes, but she is unable to do so by April 15. What form does she need to complete to obtain an automatic six-month extension? A. 1040 B. 1099 C. 4868 D. W-2 E. W-4

B

68. Nancy is married to Jerry and needs to complete her tax form. They both earn about the same amount of money each year. What filing status would be best for them? A. Single B. Married, filing a joint return C. Head of household D. Qualifying widow or widower E. Married, but filing individually

D

69. Bob was married to Sandy, and they have a 12-year-old son. Sandy passed away last year. Bob needs to complete his federal income taxes for the year. What filing status could he use because of his marital status? A. Single B. Married, filing a joint return C. Head of household D. Qualifying widow or widower E. Married, but filing individually

E

70. Which of the following is NOT a valid form for filing federal income taxes? A. 1040EZ B. 1040A C. 1040 D. 1040X E. 1040Z

D

71. Peter filed his federal income taxes, but he needs to make a correction to his income. Which form should he use? A. 1040EZ B. 1040A C. 1040 D. 1040X E. 1040Z

C

72. Amanda and Jack are working on their taxes and need to determine which form to file. They had wages, interest, and dividends. In addition, they bought a house this past year and are thinking of itemizing their deductions. Which form should they use? A. 1040EZ B. 1040A C. 1040 D. 1040X E. 1040Z

E

73. The major sections of Form 1040 include all of the following except A. Filing status and exemptions. B. Adjustments to income (AGI). C. Tax credits. D. Signature. E. All of these are major sections of Form 1040

D

74. Individuals can file their federal taxes using all of the following except A. Tax software. B. Mail. C. Electronic filing. D. Fax. E. All of these can be used.

C

81. David thinks that his salary and tax rate for next year will be higher than for this year. What step should he take to minimize his taxes in the current year? A. Delay receipt of income. B. Delay filing taxes. C. Accelerate receipt of income. D. Accelerate deductions. E. None of these will allow him to minimize his taxes.

B

82. Which of the following is NOT an action that can reduce your taxes? A. Owning a home. B. Taking out a consumer loan. C. Paying certain work expenses such as union dues. D. Depositing money into a flexible spending account (FSA). E. Investing in municipal bonds.

E

83. All of the following can reduce your taxes today except investing in A. Municipal bonds. B. A tax-deferred annuity. C. A Section 529 savings plan. D. A 401(k) plan. E. A Roth IRA.

E

84. Evan is not concerned about immediate tax benefits but instead wants to minimize his future taxes. Which of these would be the best for him to invest in today? A. Municipal bonds B. A tax-deferred annuity C. A Section 529 savings plan D. A 401(k) plan E. A Roth IRA

C

85. The maximum that an individual can contribute to a Roth IRA each year is A. $1,000. B. $3,000. C. $5,000. D. $10,000. E. $15,500.

B

86. The maximum that an individual can contribute to a Coverdell Education Savings Account each year is A. $1,000. B. $2,000. C. $3,000. D. $5,000. E. $15,500.

E

87. The maximum that an individual can contribute to a Keogh plan each year is A. $2,000. B. 10% of annual income. C. $5,000. D. $15,500. E. 25% of annual income, up to a maximum of $49,000.

C

88. 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? A. Roth IRA B. 401(k) C. Keogh plan D. FSA E. Traditional IRA

C

89. An advantage of investing in a 401(k) plan is the A. Ability to invest up to 25% of your annual income. B. Opportunity to save $5,000 per year. C. Possibility of receiving an employer match on your contributions. D. Ability to pay taxes on distributions. E. Ability to roll IRA contributions into a 401(k).

D

90. Janet is completing her federal income taxes for the year and has identified the amounts listed here. How much can she rightfully deduct? • AGI: $42,000 • Medical and dental expenses: $1,100 • State income taxes: $1,000 • Mortgage interest: $7,000 • Charitable contributions: $1,250 A. $3,350 B. $7,000 C. $8,250 D. $9,250 E. $10,350

B

91. Sam and Diane are completing their federal income taxes for the year and have identified the amounts listed here. How much can they rightfully deduct? • AGI: $80,000 • Medical and dental expenses: $9,000 • State income taxes: $3,500 • Mortgage interest: $9,500 • Charitable contributions: $1,000 A. $14,000. B. $17,000. C. $20,000. D. $23,000. E. $57,000.

D

92. Jason's household consists of himself, his wife, and their 2-year-old daughter. How much can Jason claim for his exemptions? A. $1,000. B. $3,700. C. $7,400. D. $11,100. E. $15,000.

B

93. Using the following table, calculate the taxes for an individual with taxable income of $20,800. (tax table is on pdf. file) A. $850. B. $2,695. C. $5,175. D. $6,025. E. $20,800

B

98. George Franklin paid taxes of $4,375 on a taxable income of $32,000. What was his average tax rate? A. 10% B. 13.7% C. 15% D. 25% E. 28%

Bernice has a job sending bills to customers and recording their payments. Bernice's job is an example of which type of career?

Accounting

Recording payments made on account, preparing balance sheets, and preparing a quarterly income tax report are classified as which type of activity?

Accounting

Pre- shopping research for new cars should focus on

All of the these

The most comprehensive information about automobiles appears in the (BLANK) issue of Consumer Reports

April

Maxine used her bank credit card to make a three- day reservation at a fancy hotel. when she tried to charge another purchase to the same credit card, Maxine was surprised to learn that her credit limit had been reacher. what probably caused this?

Credit and blocking

the borrower will not receive the full amount of a loan when the (BLANK) method is used to calculate interest

Discount

nongovernmental (blank) mortgage insurance is generally required for any mortgage loan where the down payment is less than 20 percent

FHA

Counseling customers who want to buy corporate bonds, selling life insurance, and analyzing company spending and savings plans are classified as which type of activity?

Finance

John works buying and selling stocks and bonds for his customers. John's job is an example of which type of career?

Finance

What is one difference between an investment counselor and a stock broker?

Investment counselors recommend all types of investments for clients.

the legal right to seize and dispose of property to obtain payment of an unpaid claim is called

Lien

from simply a financial perspective, the nest way to buy vehicles is to buy

buy one or two year old cars and drive them for five or more year

an (blank) offers a history of the ownership of a piece of property.

certificate of title

the dollar value of the home in excess of the outstanding mortgage debt is called

collateral

which of the following is/are recommendation(s) to improve your FICO score?

distribute credit use across total credit availability with no more than 30% debt per card

a (blank) message placed in your credit report notices potential credit grantors to verify your identification before extending credit to your name

fraud alert

when the declining-balance method is used to calculate interest is applied to the

outstanding balance each period

A method NOT recommended for getting our of excessive credit card debt is to

pay the minimum amount due on your high interest rate cards and pay as much as possible on the lowest interest rate cards

Dishonest or deceptive practices by lenders who take advantage of consumers' lack of understanding of credit matter is called

predatory lending

With a home equity line of credit the collateral is

the difference between what the home is worth and the balance owed on the first mortgage

what does it mean in auto leasing and auto financing when you are said to be upside down?

you owe more on the car than it is worth