Finance 3000 – Quiz 1 – Chapters 1-4 - Spring 2005 – February 16, 2005
Dr. Dowling Name: __________________________
Instructions: You are to circle the letter of the correct answer on this exam and you are to record your answers using your wireless transmitter in CPS.
1. Which of the following items is a set amount on which no taxes are paid?
A) an earned tax credit D) capital gains
B) itemized deductions E) the standard deduction
2. A tax credit of $50 for a person in a 28 percent tax bracket would reduce a person's taxes by
A) $14. B) $50. C) $35. D) $10. E) $28.
3. Earnings from a limited partnership would be an example of ____________ income.
A) investment B) portfolio C) earned D) excluded E) passive
4. Which of the following would be deducted from gross income to obtain adjusted gross income?
A) charitable contributions D) medical expenses
B) foreign income exclusion E) mortgage interest
C) alimony payments
5. Reductions from gross income for such items as individual retirement account contributions and alimony payments will result in
A) earned income. D) total exclusions.
B) passive income. E) adjusted gross income.
C) taxable income.
6. George Washburn had earnings from his salary of $34,000, interest on savings of $800, a contribution to an individual retirement account of $1,500, and dividends from mutual funds of $600. George's adjusted income (AGI) would be
A) $34,000. B) $34,800. C) $35,400. D) $34,600. E) $33,900.
7. For a dependent to qualify as an exemption, he or she must
A) be a relative.
B) receive more than one half of his or her support from the taxpayer.
C) be under age 16.
D) be married.
E) be registered in school.
8. Which of the following is an example of a tax credit?
A) amounts withheld for social security
B) passive investment income
C) child and dependent care expenses
D) individual retirement account contributions
E) mortgage interest
9. As of 2002, a short-term capital gain referred to investments
A) involving real estate. D) not taxed as ordinary income.
B) held less than 18 months. E) in foreign companies.
C) made involving small companies.
10. Capital gains refer to
A) earnings from investments such as dividends or interest.
B) profits from the sale of an investment asset.
C) tax-deferred investments.
D) retirement accounts.
E) tax-exempt investments.
11. A deduction from adjusted gross income for yourself, your spouse, and qualified dependents is
A) an itemized deduction. D) the standard deduction.
B) an exemption. E) an exclusion.
C) a tax credit.
12. An amount not included in gross income is
A) portfolio income. D) an exclusion.
B) a tax credit. E) earned income.
C) an exemption.
13. The ______________ property tax is based on the value of land and buildings.
A) proportional B) direct C) regressive D) real estate E) personal
14. ____________ are expenses that a taxpayer is allowed to deduct from adjusted gross income.
A) Passive income D) Exemptions
B) Tax credits E) Itemized deductions
15. Which form would an individual use who has less than $50,000 in taxable income from wages, salaries, tips, unemployment compensation, interest, or dividends, and who is married and does not itemize deductions?
A) Form 1040EZ B) Schedule A C) Form 1040 D) Form 1040A
16. Which type of audit is the least complicated for taxpayers?
A) an office audit D) a research audit
B) a correspondence audit E) a field audit
C) a documentation audit
17. For which of the following types of credit plans is the interest tax deductible?
A) a credit card D) a person cash loan from a credit union
B) a home equity loan E) an auto loan
C) a life insurance policy cash value loan
18. A decrease in net worth would be the result of
A) income greater than expenses for a month.
B) expenses greater than income for a month.
C) assets greater than expenses.
D) increased earnings on the job.
E) income and expenses equal for a month.
19. Changes in the cost of living are
A) not a factor when preparing a budget. D) the same for different locations.
B) constant from month to month. E) the same for all goods and services.
C) different in various geographic areas.
20. Which of the following situations is a person who could be insolvent?
A) Assets $40,000; liabilities $45,000
B) Assets $56,000; annual expenses $60,000
C) Annual cash inflows $45,000; liabilities $50,000
D) Liabilities $45,000; net worth $6,000
E) Assets $78,000; net worth $22,000
21. During the past month, Jennifer Ernet had income of $3,000 and a decrease in net worth of $200. This means Jennifer's payments for the month were
A) $200. B) $2,800. C) $3,200. D) $3,000.
22. A family with $45,000 in assets and $22,000 of liabilities would have a net worth of
A) $23,000. B) $67,000. C) $41,000. D) $22,000. E) $45,000.
23. Liabilities are amounts representing
A) current assets. D) items of value.
B) living expenses. E) taxable income.
24. The payment items that should be budgeted first are
A) unplanned living expenses. C) investment funds.
B) variable expenses. D) fixed expenses.
25. An example of a long-term goal for a young couple may be
A) a new car.
B) reduction of amounts owed on credit cards.
C) increased savings.
D) income for retirement.
E) funds for a vacation.
26. A person's net worth is computed by
A) deducting current living expenses from total assets.
B) subtracting total liabilities from total assets.
C) adding liabilities and budgeted expenses.
D) adding assets and liabilities.
E) subtracting assets from current liabilities.
27. An individual retirement account is an example of a(n) ____________ asset.
A) budgeted B) liquid C) household D) common E) investment
28. Which of the following are considered to be personal financial statements?
A) Checkbook and budget D) Bank statement and savings passbook
B) Budget and credit card statements E) Balance sheet and cash flow statement
C) Tax returns
29. Which of the following payments would be considered a variable expense?
A) An installment loan payment D) A mortgage payment
B) A telephone bill E) A monthly parking fee
30. Tax-deferred employee benefits are
A) taxed at some future time. C) not subject to state income tax.
B) are taxed at a special rate. D) not subject to federal income tax.
31. Barb Hotchkins is in the 28 percent tax bracket. A tax-exempt employee benefit with a value of $500 would have a tax-equivalent value of
A) $500. B) $360. C) $140. D) $694. E) $528.
32. The purpose of the development section of a cover letter is to
A) highlight background related to a specific job.
B) get the reader's attention.
C) get the reader to take action.
D) express interest in a specific job.
E) request an interview.
33. A functional résumé is best for a person who
A) plans to advance in the same career area.
B) has just completed school.
C) has diverse skills.
D) is interested in a specific job.
E) has a continuous school and work record.
34. The purpose of a screening interview is to
A) make business contacts.
B) reduce the number of applicants for a job.
C) locate potential people for advancement within the company.
D) judge the best qualified candidates for a position.
E) obtain information on available jobs in an area.
35. Which of the following is an example of an industrial trend that could affect the job market?
A) lower inflation rates affecting spending
B) increased use of computers in manufacturing
C) fewer children being born
D) more families with both parents working
E) higher interest rates
36. The Occupational Outlook Handbook would be most useful to determine
A) current economic conditions.
B) suggested résumé formats for various career fields.
C) jobs available in your community.
D) expected employment in various career fields.
E) interview questions for various careers.
37. Change in retail sales is an example of a(n) ____________ influence on the job market.
A) competitive B) economic C) technological D) industrial E) social
38. Kenton Greer wants to locate employment positions available in his area. This information would be best obtained from
A) the Bureau of Labor Statistics.
B) business and economic news reports.
C) professional contacts.
D) an informational interview.
E) the Occupational Outlook Handbook.
39. To assess the current value of a lump-sum retirement benefit that will be received in 10 years, use the ____________ calculation.
A) future value of a single amount C) present value of annuity
B) future value of an annuity D) present value of a single amount
40. Compared to a job, a career
A) requires minimum training.
B) has limited opportunities for advancement.
C) is more financially rewarding.
D) demands regular updating of knowledge.
41. Which of the following trends is most likely to increase career opportunities in manufacturing organizations?
A) higher consumer prices D) increased exports
B) increased imports E) higher interest rates
C) reduced consumer spending
42. In the career planning process, after identifying specific job opportunities, a person should
A) plan for career growth. D) evaluate job offers.
B) evaluate the job market. E) assess interests, abilities, and goals.
C) develop a résumé and cover letter.
43. A risk premium associated with interest rates refers to
A) a loan with a short maturity. D) expected lower inflation.
B) higher earnings due to uncertainty. E) lower consumer prices.
C) expanded exports.
44. Using the services of financial institutions will be most evident in your effort to
A) analyze your current personal and financial situation.
B) implement the financial plan.
C) evaluate and revise your actions.
D) create a financial plan of action.
E) develop financial goals.
45. Higher consumer prices are likely to be accompanied by
A) lower interest rates. D) lower union wages.
B) higher exports. E) lower production costs.
C) higher interest rates.
46. If a person deposited $50 a month for 6 years earning 8 percent, this would involve what type of computation?
A) present value of a series of deposits D) future value of a single amount
B) simple interest E) future value of a series of deposits
C) present value of a single amount
47. Which of the following would cause prices to drop?
A) a demand for higher wages D) increased production by business
B) increased taxes on business E) higher levels of demand by consumers
C) a reduction in the money supply
48. Higher interest rates can be caused by
A) an increase in the money supply.
B) increased saving and investing by consumers.
C) lower government spending.
D) a lower money supply.
E) a decrease in consumer borrowing.
49. Reduced funds available for investment in our economy could result from
A) reduced spending for consumer goods.
B) expanded savings by consumers.
C) higher imports than exports.
D) higher exports than imports.
50. Which of the following would increase the risk of a loan?
A) lower consumer prices D) a short time to maturity
B) higher consumer prices E) constant interest rates
C) a good credit rating