exam 2 aaec

Jim sold a capital asset for $5,500 that he paid $4,000 for two years ago. Jim will have to pay capital gains tax on:

$1,500. Jim sold a capital asset for $5,500 that he paid $4,000 for two years ago. Jim will have to pay capital gains tax on $1,500. The capital gain is the difference between what Jim sold the asset for and what he paid for the asset. So, his capital gain was $5,500 - $4,000 = $1,500.

Which of the following may be a disadvantage of an online savings​ account?

It may take a few days for you to actually get the funds when you need to make a withdrawal

There are two main education tax credits available to students​ - the American Opportunities Credit and the Lifetime Education Credit. Which of the following situations will allow the person to claim the American Opportunities​ Credit?

Joachim, age​ 30, in his 4th year of his​ Bachelor's Degree after serving in the US​ Army, no one claims him as a dependent.

Corinna is trying to balance her checkbook. Her ending statement balance is ​$2,000. She had ​$750 in checks that have not cleared the bank and ​$650 of deposits that the bank has not processed yet. What should Corinna​'s adjusted ending balance be for this statement​ period?

$1900 2000-750+650 = 1900

***Your taxable income​ (Line 15, Form​ 1040) is ​$24000. Your filing status is Single. Calculate the amount of federal income taxes you will owe for 2020.

$2,682.5

The Federal Deposit Insurance Corporation (FDIC) insures deposits at commercial banks for up to __________ per depositor.

$250,000

Jessica inherited $282,000 from her grandfather which she used to buy a certificate of deposit at a local bank. However, the bank was just declared insolvent and taken over by federal regulators. How much money will Jessica potentially lose?

$32,000 Jessica inherited $282,000 from her grandfather which she used to buy a certificate of deposit at a local bank. However, the bank was just declared insolvent and taken over by federal regulators. Jessica could potentially lose $32,000 since the CD is only guaranteed up to $250,000.

What is your average tax rate on your total income if you paid $3,211 in taxes and your AGI was $29,900 but your combined pre-tax income from all sources was $51,982?

6.2% Your average tax rate on your total income if you paid $3,211 in taxes and your AGI was $29,900 but your combined pre-tax income from all sources was $51,982 is 6.2%. You compute this by dividing the taxes paid by the pre-tax income from all sources (i.e. total income). So, $3,211/$51,982 = .06177 or approximately 6.2%.

The primary difference between a savings account and a money market account​ is:

A money market account typically earns a slightly higher annual return​ (APY) than a savings account.

The __________ converts interest rates with different compounding frequencies into a comparable annual interest rate so investors can make accurate comparisons.

APY

Which of the following is can NOT be listed as an itemized expense on Schedule​ A?

Traditional IRA contributions made during the year

Doc​ White's tips for writing checks​ include:

Use capital letters when writing the amount of the check in words B. Start writing the numbers for the amount of the check at the far left side of the enty box C. Write the information in your checkbook register BEFORE you write the check D. ALWAYS use commas and decimals when wrting the check amount in the entry box. E. Draw a line from the end of the written​ (words) amount of the check to the righhand side of the check. F. ***All of the above are good tips for writing checks.

Which of following is a legal and suggested method of reducing the annual federal income taxes for a married​ couple?

Using the larger of your standard deduction or itemized deduction

You are trying to decide whether to use​ the​ $12,400 standard deduction or your itemized​ deductions​ (Schedule​ A) for your Form 1040 income tax form. Here is​ your​ information: Your Marginal Tax Bracket ​ (22%) Adjusted Gross Income​ (line 11) ​ ​ ​ ($80,000) Medical Expenses ​​($12,000) Interest on Student​ Loan ​ ​ ($2,000) Interest on Home​ Mortgage ​ ($3,000) Interest on Credit Cards ​($5,000) State and Local Income Taxes​ Paid ​ ($2,500) Charitable​ Gifts​ (in​ total) ​ ​ ($1,000)

You can reduce your taxable income by an additional​ $100 by using the itemized deductions instead of the standard deduction.

A time deposit that pays a fixed rate of interest is known as:

a savings account.

​Joe's checkbook register shows a balance of ​$1,250. His monthly bank statement shows an ending balance of ​$1,300. Jose has ​$100 of deposits that are not showing up on his bank statement. Which of the following must be​ true?

He has ​$150 in checks that have not cleared the bank as of the date of his bank statement

Which of the following is an example of a​ "stored value​ card"?

Hokie Passport

Which of the following types of interest represents a tax deduction for individual (non-business) taxpayers?

Home mortgage interest paid

Investment A offers a​ pre-tax return of​ 10%. Investment B is​ tax-free and offers a return of​ 7.5%. You are in the​ 30% marginal tax bracket. Which of these investments will provide you with the highest return after taxes are​ paid?

Investment B

A convenience credit card user:

pays the balance in full every month.

An IRS allowed reduction in your income which reduces your tax liability is called a:

personal exemption.

A tax system where higher levels of income are taxed at higher tax rates is known as a:

progressive tax system.

Jorge wrote a check to a local vendor prior to inspecting the vendor's work on his house. However, after inspection he is dissatisfied with the quality of the work. Assuming the vendor has not cashed the check Jorge can:

put a stop payment on the check.

Which of these is not a recognized strategy designed to minimize your tax liability?

quit your job

A line of credit that is extended prior to making a purchase that enables you to pay back the loan over a period of time while paying interest on the unpaid balance is known as:

revolving credit.

T-bills are short-term debt issued by the U.S. Treasury that are considered to be:

risk-free

A physical storage location at a financial institution that you can rent and use to store important documents and other small items is known as a:

safety-deposit box.

A credit card that offers a line of credit backed by collateral is known as a(n):

secured card.

A ______ is similar to a debit card, but differs because the card itself magnetically stores its own accounts.

smart card

A(n) __________ is a set deduction that a taxpayer is allowed to take regardless of actual expenses.

standard deduction

Income that you can postpone the payment of taxes until a later date is known as:

tax-deferred income.

Your __________ income is a function of your AGI, deductions, and exemptions.

taxable

Some people may postpone saving for retirement since there is so much uncertainty surrounding the future. In behavioral finance this tendency to discount the future is known as:

temporal myopia.

If an unmarried taxpayer's annual income exceeds __________, they are required to file a tax return.

the sum of the standard deduction and one personal exemption

Credit unions are popular banking institutions​ because:

they offer higher interest rates on savings accounts and lower interest rates on loans

A type of credit extended to customers who make repeat purchases from the same vendor is known as a(n):

traditional charge account.

Financial planners recommend having an emergency fund that should only be used for:

unexpected events.

A primary benefit of using a​ "CD Ladder" for your emergency funds​ is:

uou will have money available on a regular basis when each CD matures B. you should earn a higher average rate of return than just using 1​ short-term CD C. all of the above Your answer is correct. **** D. none of the above

The factor that has the greatest impact on your credit score is:

your payment history.

You are in the​ 32% marginal income tax bracket. You have the option of choosing a​ $1,000 tax adjustment or taking a​ $300 tax credit. Which option will give you the most tax​ savings?

​$1,000 tax deduction

Carla is trying to balance her checkbook. Her ending statement balance is ​$2,500. She had ​$500 in checks that have not cleared the bank and ​$250 of deposits that the bank has not processed yet. What should Carla​'s adjusted ending balance be for this statement​ period?

​$2250

Your taxable​ income​ (line 15 of the​ form​ 1040)​ is​ $45,000. Your filing status is Married Filing Jointly. Using the 2020 Income Tax​ Rate​ Schedule, please calculate the amount of income taxes you will owe for the year.​ ​

​$5,005.00

A FICO score ranges between:

300 and 850.

Your employer deducts __________ % from your income for Social Security taxes.

6.2%

Angela purchased 1,000 shares of stock in XYZ company three years ago for $27 a share. She still owns the stock and the price has moved up to $45 per share. What is her current tax liability on this gain assuming capital gains are taxed at a rate of 15%?

0 Angela purchased 1,000 shares of stock in XYZ company three years ago for $27 a share. She still owns the stock and the price has moved up to $45 per share. Her current tax liability on this gain assuming capital gains are taxed at a rate of 15% is zero. Angela's gain is still unrealized since she has not sold the stock. She will not have any tax liability on the appreciation of this asset until she sells it. At that time she will have to pay capital gains tax on the profits.

Which of these is not a tax-deferred retirement plan?

1040A

The simplest tax form available is the:

1040EZ.

For an asset sale to be treated as a long-term capital gain you have to own the asset for at least:

12 months.

What is the after-tax return on a money market mutual fund if it is currently paying 3% and you are in a 28% marginal tax bracket?

2.16% The after-tax return on a money market mutual fund if it is currently paying 3% and you are in a 28% marginal tax bracket is 2.16%. You compute the after-tax return by multiplying the pre-tax return by the factor (1 - marginal tax rate). So, the after-tax return is = 3%(1 - .28) = 2.16%

Kavita and Raj use the​ married, filing jointly tax status. Their combined taxable income is​ $180,000. What is the appropriate marginal tax bracket​ (%) for them to use when they are trying to determine the​ after-tax returns on their​ investments? ​ (Use the 2020 Income Tax Rate Schedule to answer this​ question)

24%

A certificate of deposit, or CD, pays a fixed rate of interest on deposits ranging in term from:

30 days to several years.

Which of the following cash management accounts is very useful for people who have a significant amount of money because it can link to their​ investments, their​ debt/credit cards, and earn slightly higher rates of​ return?

Asset Management or​ "sweeps account"

Which of these is considered a deposit-type financial institution?

Bank

You want to sell your car on CraigsList. Which of the following forms of payments is the least risky for you to accept from someone you do not​ know?

Cashier's Check

Which of the following is basically a​ "loan to a​ bank" for a specified period of​ time?

Certificate of deposit​ (CD)

What type of check is paid using funds from your personal checking​ account, but the bank guarantees the payee that there is enough money in your account to cover the​ check?

Certified check

​Amir's ending balance in his checkbook is​ $1,550. After reconciling his checkbook his reconciled ending balance is​ $1,523. Which of the following is a possible cause for this​ error?

Chances are that he transposed a number in his checkbook register.

Which of these is not one of the three Cs of choosing a financial institution?

Collateral

Doc​ White's tip for finding transposed numbers in your checkbook can help you find errors when you are balancing your checkbook. The tip for finding transposed numbers is​ to:

Divide the difference between your ending checkbook balance and your reconciled ending balance by 9. If the answer is a whole number​ (integer) chances are that you transposed an amount.

Social Security and Medicare deductions are typically listed on your pay stub under the heading:

FICA

True or False. You are in the​ 12% marginal tax bracket. You make a Roth IRA contribution of​ $5,000 for tax year 2020. This contribution will reduce your income taxes by​ $600 for 2020.

False

Which of the following is not a valid method of reducing your federal income taxes for this tax​ year?

Making contributions to your Roth​ 401(k)

The government insurance program that provides medical benefits to retirees over the age of 65 is called:

Medicare

What form of a check​ (or form of​ payment) can you get from the US Post Office or from many convenience​ stores, for a​ fee?

Money Order

Which of these accounts is not federally insured?

Money market mutual funds

Which of these is considered to be a liquid asset?

Money market mutual funds

Mr. J. Pearson had a very good piece of personal financial advice for you in the​ Q&A session of his video. He said that the best piece of advice he could give his children​ was:

Save. Save early. And save​ more!

Deshawn wants to help pay for his​ grandchild's college education. He wants to invest in a financial asset that is safe and will provide income tax benefits if it is used for educational expenses. Which of the following would be a good investment option that meets​ Deshawn's goals?

Series EE Savings Bond

Which of these is not a recognized filing status according to the IRS?

Single filing jointly

When you are hired at a new job you will have to fill out several employment forms. One of these forms is called the​ W-4 Form. This form is used​ to:

Specify the amount of your salary you want to have withheld for federal income tax each pay period.

You should check your credit report frequently in order to ensure:

accuracy of your information.

A credit card issued by Visa or MasterCard with your university's logo is an example of a(n):

affinity card.

Any cash transfer that takes place automatically is known as:

an electronic funds transfer.

When the IRS examines your tax return to verify accuracy it is called an:

audit.

About 95% of the credit cards issued use the __________ method to compute the interest charges on your unpaid credit balance.

average daily balance

When adversity​ hits, many households face financial problems. One way to minimize this risk to your household is​ to:

build an emergency fund of at least​ 3-6 months of living needs.

Determining how much money to keep in liquid assets and where to keep it is the subject of:

cash management.

A __________ is a check drawn on a financial institution's account.

cashier's check

Which of these is an advantage of online banking?

convenience

A card that allows you to access your bank account electronically is known as a:

debit card.

For most credit cards the grace period __________ if you do not pay your bill in full every month.

does not apply

One example of a negative income tax is the:

earned income credit.

Jill recently bounced a check and is upset about the fees that she was charged. Which of the following strategies will be most helpful in avoiding this situation in the future?

establish overdraft protection

In the past 100 years the highest marginal U. S. tax rate has:

exceeded 90%.

Once you have graduated and taken a job you may be able to claim your​ parents, grandparents, or any other relatives as dependents on your 1040 tax form. ​ However, they must have lived with you for at least 3 months out of the year.

false

The only people who can be claimed as dependents on a 1040 tax form are spouses and children who have lived in your house for more than half of that tax year.

false

You should try to minimize the amount of income taxes you pay rather than trying to maximize how much money you have left after you pay your income taxes.

false

When someone commits a crime using your personal information without your knowledge it is known as:

identity theft.

When you get a credit card cash advance from an ATM you begin paying interest:

immediately.

Your marginal tax rate is the fraction of your __________ that you paid in taxes.

last dollar earned

Liquid assets are __________ risk and generate __________ returns.

low; low

A credit bureau is a private organization that:

maintains individual credit information.

Kendra and Keyshawn are married with 2 children​ - Kyle and Kassandra. They live and work in northern Virginia. Their salaries are similar to each other​ - Kendra earns​ $65,000, Keyshawn earns​ $60,000. Which filing status on the Form 1040 will give them the most tax​ advantages?

married filing jointly

When you use your credit card to make a purchase the seller will pay a portion of the purchase to the credit card issuer in the form of a fee. This fee typically ranges between 1% to 3% of the cost of the item and is known as a(n):

merchant's discount fee.

Margo and Hector were married for 12 years prior to Hector's recent death. How much will Margo have to pay in estate taxes if their combined estate is worth $8 million assuming the estate tax rate is 40%?

nothing Margo and Hector were married for 12 years prior to Hector's recent death. Margo will pay nothing in estate taxes even if their combined estate is worth $8 million and the estate tax rate is 40%. Surviving spouses do not owe estate taxes regardless of the size of the estate.

Critics maintain that one of the primary disadvantages of using credit cards is that it makes it too easy to:

overspend.

Income derived from activities in which the taxpayer did not actively participate is called:

passive income.

Financial planners recommend __________ to make it easier to save.

paying yourself first