Chapter 3 Verified Test Bank Earnings & Financial Journey - Test Bank | Personal Finance Intro 2e by John E. Grable. DOCX document preview.
Introduction to Personal Finance, 2e (Grable)
Chapter 3 Earnings and Income: The Building Blocks of Your Financial Journey
1) To accumulate wealth, you need to generate a(n)
A) surplus.
B) deficit.
C) expense.
D) income.
Diff: 2
LO: 3.1, Section 3.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
2) Which of the following refers to the money left over after all of your expenses have been paid?
A) Surplus.
B) Deficit.
C) Net worth.
D) Assets.
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
3) Which of the following refers to expenses exceeding income?
A) Surplus.
B) Deficit.
C) Liability.
D) Assets.
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
4) Which of the following indicates the percentage of income that you are actively saving?
A) Surplus ratio.
B) Deficit ratio.
C) Net worth ratio.
D) Savings ratio.
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
5) Which of the following is the savings ratio attained over a specific time period?
A) Surplus rate.
B) Deficit rate.
C) Targeted savings rate.
D) Targeted spending rate.
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
6) Which of the following indicates the percentage of your income that you are spending to pay down your debts?
A) Total income-to-expense ratio.
B) Total debt-to-income ratio.
C) Targeted savings ratio.
D) Savings ratio.
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
7) Which of the following refers to having your employer take money automatically from your paycheck and contribute it directly to a retirement savings plan or a savings account?
A) Payroll deduction.
B) Payroll tax.
C) Targeted savings ratio.
D) Savings ratio.
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
8) Which of the following is the recommended targeted savings rate if you are under age 30?
A) 10%.
B) 12%.
C) 15%.
D) 20%.
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
9) Which of the following is the recommended targeted savings rate if you are between age 30 and 40?
A) 10%.
B) 12%.
C) 15%.
D) 20%.
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
10) Which of the following is the recommended targeted savings rate if you wait until age 40 to start saving?
A) 10%.
B) 12%.
C) 15%.
D) 20%.
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
11) Which of the following may result from spending beyond your income?
A) More saving.
B) More borrowing.
C) Increased net worth.
D) Decreased liabilities.
Diff: 1
LO: 3.1, Section 3.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
12) What should you do to accumulate wealth?
A) Accumulate a surplus.
B) Begin saving the surplus as early as possible.
C) Keep your money working for you as long as possible.
D) All of the choices are correct.
Diff: 1
LO: 3.1, Section 3.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
13) Which of the following would calculate the savings ratio?
A) 
B) 
C) 
D) 
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
14) Which of the following is the total debt-to-income ratio?
A) (Total Net Worth ÷ Gross Income) × 100.
B) (Total Required Debt Payments ÷ Gross Income) × 100.
C) (Total Assets ÷ Gross Income) × 100.
D) (Total liabilities ÷ Gross Income) × 100.
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
15) Which of the following refers to your income before any taxes or other expenses are deducted from your paycheck?
A) Net income.
B) Gross savings.
C) Gross income.
D) Net pay.
Diff: 1
LO: 3.1, Section 3.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
16) What is Renea's surplus available for saving and investing if she has an annual income of $73,000 and living expenses of $59,000?
A) $10,000.
B) $14,000.
C) $20,000.
D) $25,000.
Diff: 2
LO: 3.1, Section 3.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
17) Maria has an annual income of $35,000 and has saved $4,250 last year. What is Maria's saving ratio? (Round answer to the nearest percent.)
A) 8%.
B) 10%.
C) 12%.
D) 14%.
Diff: 2
LO: 3.1, Section 3.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
18) Jorge has a monthly gross income of $3,500. What is his total debt-to-income ratio if he has the following monthly debt payments: $325 car payment, $290 student loan payment, $930 mortgage payment, and $400 credit card payment? (Round answer to the nearest percent.)
A) 18%.
B) 31%.
C) 43%.
D) 56%.
Diff: 2
LO: 3.1, Section 3.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
19) Which of the following describes all sources of money obtained by individuals and households?
A) Income.
B) Savings.
C) Wage.
D) Bonus.
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
20) Which of the following refers to compensation received for services performed for an employer?
A) Income.
B) Earnings.
C) Allowance.
D) Dividends.
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
21) Which of the following is what employers pay for an employee to work, typically on an hourly basis?
A) Income.
B) Earnings.
C) Salary.
D) Wage.
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
22) Which of the following is a payment for a set period of time, typically a year?
A) Income.
B) Earnings.
C) Salary.
D) Wage.
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
23) Which of the following is a payment based on the sale of a product or service?
A) Income.
B) Bonus.
C) Salary.
D) Commission.
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
24) Which of the following is a supplemental payment usually based on performance or meeting certain production or sales requirements?
A) Income.
B) Bonus.
C) Salary.
D) Commission.
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
25) The most common wage system is based on which of the following?
A) Weekly.
B) Hourly.
C) Salary.
D) Annually.
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
26) How much is the minimum wage in the United States?
A) $7.25 per hour.
B) $8.25 per hour.
C) $9.25 per hour.
D) $10.25 per hour.
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
27) Which of the following is defined as working more than 40 hours in one week?
A) Excess.
B) Bonus.
C) Overage.
D) Overtime.
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
28) If you regularly receive more than $30 in tips per month, then federal rules allow for a minimum wage of ________ per hour.
A) $3.25
B) $7.25
C) $2.13
D) $7.13
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
29) How much will Mia earn per week given the following information: works 45 hours per week at $12 base rate per hour and overtime for any work over 40 hours per week?
A) $540.
B) $570.
C) $600.
D) $480.
Diff: 2
LO: 3.2, Section 3.2
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
30) Those on salary typically earn ________ than hourly workers, at least before overtime pay is included.
A) twice as much
B) more
C) less
D) There is no difference.
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
31) Those on salary typically have ________ those working for a wage.
A) free employee benefits compared to
B) worse employee benefits than
C) better employee benefits than
D) the exact employee benefits as
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
32) How are those who graduate from college and work in a professional field typically paid?
A) Income.
B) Hourly.
C) Salary.
D) Annually.
Diff: 1
LO: 3.2, Section 3.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
33) Jorge earns $20 per hour. He works 40 hours per week and takes two weeks of paid vacation each year. How much does Jorge earn per year, assuming that he does not receive overtime pay?
A) $40,000.
B) $41,600.
C) $46,000.
D) $51,000.
Diff: 2
LO: 3.2, Section 3.2
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
34) Which of the following refers to earning income from a business that you operate?
A) Employed.
B) Self-employed.
C) Investor.
D) Bonus-employed.
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
35) What percent of self-employed individuals have one or more employees working for them?
A) 25%.
B) 30%.
C) 35%.
D) 40%.
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
36) What percent of all workers in the United States are self-employed?
A) 5%.
B) 10%.
C) 15%.
D) 25%.
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
37) Which of the following is a characteristic of a self-employed individual?
A) Wanting to be his or her own boss.
B) Possessing a strong sense of individual responsibility.
C) Placing a high emphasis on individual effort.
D) All of the choices are correct.
Diff: 1
LO: 3.3, Section 3.3
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
38) If an individual is self-employed and considered an independent contractor, what percent of Social Security and Medicare taxes is he or she required to pay relative to salaried individuals?
A) 20%.
B) 25%.
C) 50%.
D) 100%.
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
39) The small business survival rate ________ over time.
A) increases
B) declines
C) stays the same
D) doubles
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
40) What is the default legal structure of a self-employed individual?
A) Corporation.
B) Partnership.
C) Sole proprietorship.
D) Employer.
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
41) Which of the following refers to being totally responsible for paying all liabilities a business incurs?
A) Unlimited liability.
B) Limited liability.
C) General liability.
D) Capital liability.
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
42) Which of the following is the most basic type of partnership?
A) Limited partnership.
B) Limited liability partnership.
C) General partnership.
D) Sole partnership.
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
43) Which of the following refers to a business partnership where there is a general partner who manages the business and one or more limited partners who simply invest money into the partnership and are not involved in the day-to-day management?
A) Limited partnership.
B) Limited liability partnership.
C) General partnership.
D) Sole partnership.
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
44) Which of the following types of partnership is often used by doctors, attorneys, and accountants?
A) Limited partnership.
B) Limited liability partnership.
C) General partnership.
D) Sole proprietorship.
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
45) Which of the following shields the personal assets of all the owner(s) from the liabilities of the business?
A) Sole proprietorship.
B) Capital partnership.
C) Limited liability company.
D) General partnership.
Diff: 1
LO: 3.3, Section 3.3
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
46) Which of the following refers to a legal structure that is separate from the owners of the business?
A) Limited partnership.
B) Corporation.
C) General partnership.
D) Sole proprietorship.
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
47) If you are self-employed, how you choose to structure your business can have a big effect on your ability to make decisions about the business, such as issues related to which of the following?
A) Raising and borrowing money.
B) Limiting your liability.
C) Paying taxes.
D) All of the choices are correct.
Diff: 1
LO: 3.3, Section 3.3
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
48) What type of partnership is designed for professionals working in a partnership so that partners will not be held liable for the negligent actions (and resulting liabilities) of other partners but they will still be liable for the general obligations of the business?
A) Limited partnership.
B) Limited liability partnership.
C) Limited liability company.
D) General partnership.
Diff: 1
LO: 3.3, Section 3.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
49) Timothy would like to start his own business. His wife is a stay-at-home mother of two young children. Which of the following would be a disadvantage of self-employment?
A) Lack of employer-provided health insurance.
B) Additional tax deductions.
C) Set own hours.
D) Ability to sell business in the future for a profit.
Diff: 2
LO: 3.3, Section 3.3
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
50) Samuel is starting a delivery business with one delivery truck in which he is the delivery driver. Samuel is using his own money to purchase the truck and does not want to do a lot of paperwork to start his business. Which business structure would best fit his situation?
A) Corporation.
B) Limited liability company.
C) Sole proprietorship.
D) Partnership.
Diff: 2
LO: 3.3, Section 3.3
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
51) Which of the following refers to money you receive from work?
A) Earned income.
B) Unearned income.
C) Declared income.
D) Taxable income.
Diff: 1
LO: 3.4, Section 3.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
52) Which of the following refers to the money you receive from the investments that you have made?
A) Earned income.
B) Unearned income.
C) Earnings.
D) Commissions.
Diff: 1
LO: 3.4, Section 3.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
53) Which of the following refers to a combination of earned and unearned income?
A) Earned income.
B) Employment income.
C) Taxable income.
D) Total income.
Diff: 1
LO: 3.4, Section 3.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
54) When you stop working and retire, your total income will consist primarily of ________ income sources.
A) earned
B) unearned
C) employment
D) self-employed
Diff: 1
LO: 3.4, Section 3.4
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
55) Which of the following is a source of unearned income?
A) Dividends.
B) Interest from savings accounts.
C) Social Security benefits.
D) All of the choices are correct.
Diff: 1
LO: 3.4, Section 3.4
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
56) Which of the following is a way that an individual may make money during his or her lifetime?
A) Employment.
B) Lending.
C) Investing.
D) All of the choices are correct.
Diff: 1
LO: 3.4, Section 3.4
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
57) Which of the following is an example of earned income?
A) Tips.
B) Loans to others.
C) Dividends from ownership of a business.
D) Deposits in a bank.
Diff: 1
LO: 3.4, Section 3.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
58) Which of the following refers to an investor's share of the profits?
A) Salary.
B) Bonus.
C) Dividend.
D) Commission.
Diff: 1
LO: 3.4, Section 3.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
59) Which of the following can be measured using probabilities and can often be quite high?
A) Subjective risk.
B) Objective risk.
C) Risk.
D) Dividends.
Diff: 1
LO: 3.4, Section 3.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
60) Which of the following refers to personally developed probabilities of potential losses based on expectations, fear, worry, and other factors?
A) Subjective risk.
B) Objective risk.
C) Risk.
D) Dividends.
Diff: 1
LO: 3.4, Section 3.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
61) Which of the following varies from one person to another?
A) Subjective risk.
B) Objective risk.
C) Economic life span.
D) Rule of 72.
Diff: 1
LO: 3.4, Section 3.4
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
62) Which of the following tells you how long it will take to double your money?
A) Subjective risk.
B) Objective risk.
C) Rule of 72.
D) Economic life span.
Diff: 1
LO: 3.4, Section 3.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
63) When you make a deposit, you are essentially
A) investing in the bank or credit union.
B) borrowing from the bank or credit union.
C) lending the bank or credit union money.
D) giving the bank or credit union money.
Diff: 1
LO: 3.4, Section 3.4
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
64) Which of the following are sources of unearned income?
A) Lottery winnings.
B) Proceeds from a savings bond.
C) Government benefits.
D) All of the choices are correct.
Diff: 1
LO: 3.4, Section 3.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
65) Which of the following are sources of earned income?
A) Lottery winnings.
B) Proceeds from a savings bond.
C) Government benefits.
D) Wages.
Diff: 1
LO: 3.4, Section 3.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
66) What is Catherine's total income if she has the following sources of income: $3,500 from her job, $600 in interest from investments, and $1,000 bonus?
A) $3,500.
B) $4,100.
C) $4,500.
D) $5,100.
Diff: 2
LO: 3.4, Section 3.4
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
67) Use the Rule of 72 to calculate how long it will take Amelia to double a $10,000 investment if she expects to earn 8% interest.
A) 8 years.
B) 9 years.
C) 10 years.
D) 72 years.
Diff: 2
LO: 3.4, Section 3.4
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
68) Which of the following refers to almost everything you own or use for personal or investment purposes?
A) Investment asset.
B) Capital asset.
C) Personal asset.
D) Personal belonging.
Diff: 1
LO: 3.5, Section 3.5
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
69) Which of the following is a capital asset?
A) Your home.
B) Your car.
C) Your investments.
D) All of the choices are correct.
Diff: 1
LO: 3.5, Section 3.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
70) Which of the following happens when you sell an asset for more than you paid for it?
A) Capital gain.
B) Capital loss.
C) Dividends.
D) You break even on the sale.
Diff: 1
LO: 3.5, Section 3.5
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
71) Which of the following happens when you sell an asset for less than you paid for it?
A) Capital gain.
B) Capital loss.
C) Dividends.
D) You break even on the sale.
Diff: 1
LO: 3.5, Section 3.5
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
72) Which of the following capital losses can be reported to the Internal Revenue Service and may reduce your tax liability?
A) Sale of a home.
B) Sale of a car.
C) Sale of a stock.
D) All the choices are correct.
Diff: 1
LO: 3.5, Section 3.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
73) At what point in time will you have to pay tax on an investment?
A) Every quarter the investment increases in value.
B) When you sell or exchange the investment regardless of gain or loss.
C) Every tax year the investment increases in value.
D) When you sell or exchange the investment for more than you purchased it.
Diff: 2
LO: 3.5, Section 3.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
74) You purchased an apartment building for $100,000 and sold it 3 years later for $120,000. You paid 5% to the real estate agent who listed the property. How much is your realized gain?
A) $120,000.
B) $20,000.
C) $14,000.
D) $100,000.
Diff: 2
LO: 3.5, Section 3.5
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
75) You purchased an apartment building for $700,000 and sold it 5 years later for $820,000. You paid 6% to the real estate agent who listed the property. How much is your realized gain?
A) $120,000.
B) $70,800.
C) $49,200.
D) $80,000.
Diff: 2
LO: 3.5, Section 3.5
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
76) Which of the following is part of the process resulting in capital gains?
A) You buy or somehow obtain an asset.
B) You hold the asset for some length of time, usually to allow it to go up in value.
C) You sell the asset.
D) All of the choices are correct.
Diff: 1
LO: 3.5, Section 3.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
77) Which of the following refers to the cost of an asset?
A) Basis.
B) Dividend.
C) Capital gain.
D) Capital loss.
Diff: 1
LO: 3.5, Section 3.5
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
78) If you hold an asset for more than one year and then sell it for a profit, you will be taxed at a rate of which of the following?
A) Long-term capital gains.
B) Short-term capital gains.
C) Normal dividends.
D) Capital assets.
Diff: 1
LO: 3.5, Section 3.5
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
79) The rates on long-term gains are ________ short-term capital gain rates.
A) higher than
B) lower than
C) the same as
D) None of these answer choices are correct.
Diff: 1
LO: 3.5, Section 3.5
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
80) To increase your investment income, you should do which of the following?
A) Buy assets that have the potential to go up in value.
B) Hold assets over the long term.
C) Let the power of compounding generate unearned income.
D) All of the choices are correct.
Diff: 1
LO: 3.5, Section 3.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
81) Mia recently purchased 500 shares of a company for $20,000 ($40 per share). This year, she received a dividend of $2,000. Her shares are now worth $120. What is Mia's per share basis in the company?
A) $40.
B) $80.
C) $120.
D) $500.
Diff: 2
LO: 3.5, Section 3.5
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
82) When you inherit an asset because someone died, your basis becomes the fair market value as of the person's death. This refers to which of the following?
A) Long-term capital gain basis.
B) Estate basis.
C) Stepped-up basis.
D) Inheritance basis.
Diff: 1
LO: 3.5, Section 3.5
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
83) Which of the following is an example of a government benefit?
A) Unemployment benefits.
B) SNAP.
C) Medicaid.
D) All the choices are correct.
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
84) Which of the following refers to cash payments made to individuals who have recently lost their jobs due to no fault of their own?
A) Unemployment benefits.
B) Medicaid.
C) Supplemental Nutrition Assistance Program (SNAP).
D) Temporary Assistance for Needy Families (TANF).
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
85) How long do unemployment benefits typically last?
A) 1 year.
B) 26 weeks or less.
C) 30 days.
D) 2 years or less.
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
86) Which of the following is a typical fringe benefit?
A) Health insurance.
B) Retirement savings.
C) Sick and vacation pay.
D) All of the choices are correct.
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
87) Which of the following is a health insurance program for low-income households?
A) Temporary Assistance for Needy Families (TANF).
B) Medicare.
C) Medicaid.
D) Supplemental Nutrition Assistance Program (SNAP).
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
88) Which of the following provides supplemental income to very-low-income unemployed households who typically have children?
A) Temporary Assistance for Needy Families (TANF).
B) Medicare.
C) Medicaid.
D) Supplemental Nutrition Assistance Program (SNAP).
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
89) Which of the following is a health insurance program for elderly individuals, ages 65 and older?
A) Temporary Assistance for Needy Families (TANF).
B) Medicare.
C) Medicaid.
D) Supplemental Nutrition Assistance Program (SNAP).
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
90) Which of the following provides money to low-income households to purchase food?
A) Temporary Assistance for Needy Families (TANF).
B) Medicare.
C) Medicaid.
D) Supplemental Nutrition Assistance Program (SNAP).
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
91) Which of the following provides financial aid for low-income undergraduate students?
A) Temporary Assistance for Needy Families (TANF).
B) Federal Pell Grant.
C) Medicaid.
D) Supplemental Nutrition Assistance Program (SNAP).
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
92) Which of the following provides a record of how much taxable income has been earned for each year of an individual's working life?
A) Earnings history.
B) Temporary Assistance for Needy Families (TANF).
C) Supplemental Nutrition Assistance Program (SNAP).
D) All the choices are correct.
Diff: 2
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
93) Which of the following reduces the amount of tax someone must pay?
A) Social Security benefits.
B) Medicaid.
C) Refundable tax credit.
D) Unemployment benefits.
Diff: 1
LO: 3.6, Section 3.6
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
94) Which of the following is a refundable tax credit?
A) Earned Income Tax Credit.
B) Child Tax Credit.
C) American Opportunity Tax Credit.
D) All of the choices are correct.
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
95) Social Security benefits are based on which of the following?
A) Earnings history.
B) Unearned income.
C) Earned income.
D) Current earnings.
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
96) Which of the following is a benefit under the Social Security program?
A) Retirement benefits.
B) Disability benefits.
C) Family benefits for children under the age of 18 if you die.
D) All of the choices are correct.
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
97) The Federal Insurance Contribution Act (FICA) tax rate for both employer and employee is what percent?
A) 7.65%.
B) 12.40%.
C) 15.30%.
D) 30.60%.
Diff: 1
LO: 3.6, Section 3.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
98) Dominic is attending his second year of college and has paid $3,500 in tuition and fees. How much can he claim for his American Opportunity Tax Credit?
A) $0.
B) $1,000.
C) $2,500.
D) $3,500.
Diff: 2
LO: 3.6, Section 3.6
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
99) Kunsoon earns $72,000 per year as an employee. How much will he pay this year in FICA taxes? Only calculate Kunsoon's share of the tax.
A) $1,044.
B) $4,464.
C) $5,508.
D) $11,016.
Diff: 2
LO: 3.6, Section 3.6
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
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