Week 2 Quiz

Question 1

T/F
Financial planning is necessary only if an individual earns a lot of money.

Answer 1

False

Question 2

T/F
An individual’s auto loan payments are listed as an expense on the income and expense statement.

Answer 2

True

Question 3

T/F
It is best to prepare your financial statements at least once a year, ideally when drawing up your budget.

Answer 3

True

Question 4

T/F
An individual can maintain their personal financial statements using spreadsheet software.

Answer 4

True

Question 5

T/F
A cash budget has value only if you use it and keep careful records of actual income and expenses.

Answer 5

True

Question 6

Which of the following statements regarding an individual’s income and expense statement is true?

Answer 6

The income and expense statement measures financial performance over time.

Question 7

Stephen paid $20,000 for his car 3 years ago. He still has 24 monthly payments of $400 left to pay, and the current balance on his auto loan is $9,000. He estimates the market value of his vehicle to be $13,000. What is his equity or ownership position in his car?

Answer 7

$4,000

Question 8

Which of these is an example of a liquid asset?

Answer 8

Checking account

Question 9

When your assets exceed your liabilities, you:

Answer 9

are solvent.

Question 10

A cash budget helps you:

Answer 10

monitor and control your finances.

Question 11

The concept that a dollar today is worth more than a dollar received in the future is known as:

Answer 11

the time value of money.

Question 12

The value today of an amount to be received in the future is called:

Answer 12

present value

Question 13

Inflation is expected to be 4% in the coming year. If Mr. Gonza earned $37,000 this year, how much must he earn in the following year to keep up with inflation and maintain a balance between his income and his increasing expenditures?

Answer 13

$38,480

Question 14

T/F
Adjustments to (gross) income will decrease your taxable income.

Answer 14

True

Question 15

Ethan and Alana are married with four dependent children. Which of the following filing statuses can Ethan and Alana use if they want to legally file one tax return?

Answer 15

Married filing jointly

Question 16

Your income tax withholding is dependent on:

Answer 16

your level of earnings and the number of withholding allowances you have claimed.

Question 17

Sarah is a homeowner and a single taxpayer. She has owned and occupied the house as a principal residence for the last 8 years. In the current taxable year, she receives a promotion. She sells her home and moves to another area. The capital gain on the sale of the principal residence will:

Answer 17

be taxable excluding the first $250,000 of the gain.

Question 18

If you do not wish to itemize deductions, the other deduction you can take is the:

Answer 18

standard deduction.

Question 19

Tax credits reduce your:

Answer 19

tax liability.

Question 20

If you are a professional who is likely to receive income that is not subject to withholding, then you are required to:

Answer 20

pay an estimated tax.

Question 21

Which of the following is an illegal method of reducing your current tax liability?

Answer 21

Not reporting the taxable income you receive

Question 22

Which of these would most likely have to pay estimated taxes?

Answer 22

Independent consultant