FIN 101 EXAM 1 REVIEW QUESTIONS WITH
100% CORRECT ANSWERS
TRUE OR FALSE: A home and land should be recorded on the personal balance sheet at
their original cost.
False
TRUE OR FALSE: All assets, regardless of category, should be recorded on your balance
sheet at their current fair market value.
False
TRUE OR FALSE: Money I loaned to a friend is a liability on my balance sheet.
False
TRUE OR FALSE: You may be under-budgeting for food if you continually have monthly
deficits in the food category.
True
Your ________ is an example of a liquid asset.
a) home
b) charge account
c)checking account
d)life insurance cash value
e) car
C
Sam and his wife Ann purchased a home in Lubbock, Texas in 1980 for $100,000. Their
original home mortgage was for $90,000. The house has a current market value of $175,000
and a replacement value of $200,000. They still owe $55,000 on their home mortgage. Sam
and Sally are now constructing their balance sheet. How should their home be reflected on
their current personal balance sheet?
$175,000 asset and $55,000 liability
The balance sheet equation is
Total assets - total liabilities = net worth
Mandy and Jeff have a net worth of $25,000 and total assets of $140,000. If their revolving
credit and unpaid bills total $2,200, what are their total liabilities?
$115,000
You are solvent if your ....
, total assets exceed total liabilities
The income and expense statement is specific to ...
a specific period of time
TRUE OR FALSE: Tax avoidance is legal, tax evasion is illegal
True
The federal income tax is ....
progressive
TRUE OR FALSE: One's marginal tax rate is typically lower than one's average tax rate
False
TRUE OR FALSE: The main objective of tax planning is to maximize the amount of
money you keep by minimizing the amount of taxes you pay
True
TRUE OR FALSE: As a single taxpayer with no dependents, one is generally eligible to file
as "head of household"
False
TRUE OR FALSE: Social security taxes are paid on earned income but not investment
income
True
TRUE OR FALSE: The Medicare portion of the Social Security tax is paid on 100% of
earnings
True
For tax purposes, head-of-household refers to ...
single individual with dependents
In 2014, the total social security tax was ...
6.2%
Tom sold mutual fund shares he had owned 3 years so that he could use the proceeds to
return to college. Tom is in the 15% marginal tax bracket and his capital gains from this
sale were $11,000. How much tax would Tom owe on those gains?
$0
This is the name applied to interest earned on the initial deposit amount plus the previously
earned interest
100% CORRECT ANSWERS
TRUE OR FALSE: A home and land should be recorded on the personal balance sheet at
their original cost.
False
TRUE OR FALSE: All assets, regardless of category, should be recorded on your balance
sheet at their current fair market value.
False
TRUE OR FALSE: Money I loaned to a friend is a liability on my balance sheet.
False
TRUE OR FALSE: You may be under-budgeting for food if you continually have monthly
deficits in the food category.
True
Your ________ is an example of a liquid asset.
a) home
b) charge account
c)checking account
d)life insurance cash value
e) car
C
Sam and his wife Ann purchased a home in Lubbock, Texas in 1980 for $100,000. Their
original home mortgage was for $90,000. The house has a current market value of $175,000
and a replacement value of $200,000. They still owe $55,000 on their home mortgage. Sam
and Sally are now constructing their balance sheet. How should their home be reflected on
their current personal balance sheet?
$175,000 asset and $55,000 liability
The balance sheet equation is
Total assets - total liabilities = net worth
Mandy and Jeff have a net worth of $25,000 and total assets of $140,000. If their revolving
credit and unpaid bills total $2,200, what are their total liabilities?
$115,000
You are solvent if your ....
, total assets exceed total liabilities
The income and expense statement is specific to ...
a specific period of time
TRUE OR FALSE: Tax avoidance is legal, tax evasion is illegal
True
The federal income tax is ....
progressive
TRUE OR FALSE: One's marginal tax rate is typically lower than one's average tax rate
False
TRUE OR FALSE: The main objective of tax planning is to maximize the amount of
money you keep by minimizing the amount of taxes you pay
True
TRUE OR FALSE: As a single taxpayer with no dependents, one is generally eligible to file
as "head of household"
False
TRUE OR FALSE: Social security taxes are paid on earned income but not investment
income
True
TRUE OR FALSE: The Medicare portion of the Social Security tax is paid on 100% of
earnings
True
For tax purposes, head-of-household refers to ...
single individual with dependents
In 2014, the total social security tax was ...
6.2%
Tom sold mutual fund shares he had owned 3 years so that he could use the proceeds to
return to college. Tom is in the 15% marginal tax bracket and his capital gains from this
sale were $11,000. How much tax would Tom owe on those gains?
$0
This is the name applied to interest earned on the initial deposit amount plus the previously
earned interest
