FIN 101 EXAM 1 REVIEW UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS

FIN 101 EXAM 1 REVIEW UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS

Question:
1. TRUE OR FALSE: A home and land should be recorded on the personal balance sheet at their original
cost.
Answer:
False

Question:
2. TRUE OR FALSE: All assets, regardless of category, should be recorded on your balance sheet at their
current fair market value.
Answer:
False

Question:
3. TRUE OR FALSE: Money I loaned to a friend is a liability on my balance sheet.
Answer:
False

Question:
4. TRUE OR FALSE: You may be under-budgeting for food if you continually have monthly deficits in
the food category.
Answer:
True

Question:
5. Your ________ is an example of a liquid asset.
a) home
b) charge account
c)checking account
d)life insurance cash value
e) car
Answer:
C

Question:
6. 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?
Answer:
$175,000 asset and $55,000 liability

, Question:
7. The balance sheet equation is
Answer:
Total assets - total liabilities = net worth

Question:
8. 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?
Answer:
$115,000

Question:
9. You are solvent if your ....
Answer:
total assets exceed total liabilities

Question:
10. The income and expense statement is specific to ...
Answer:
a specific period of time

Question:
11. TRUE OR FALSE: Tax avoidance is legal, tax evasion is illegal
Answer:
True

Question:
12. The federal income tax is ....
Answer:
progressive

Question:
13. TRUE OR FALSE: One's marginal tax rate is typically lower than one's average tax rate
Answer:
False

Question:
14. 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
Answer:
True

Question:
15. TRUE OR FALSE: As a single taxpayer with no dependents, one is generally eligible to file as "head
of household"