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Question: Daniel has a marginal tax rate of


Daniel has a marginal tax rate of 25%. He suddenly realizes that he neglected to include a $1,000 tax deduction. How will this oversight affect his taxes?



> Angela analyzes her personal budget and decides that she can reduce her recreational spending by $50 per month. How much will that increase her annual savings? What will her annual savings be now?

> What is a personal balance sheet?

> ABC Stacey would like to have $1 million available to her at retirement. Her investments have an average annual return of 11%. If she makes contributions of $300 per month, will she reach her goal when she retires in 30 years?

> How do you think people who do not create a budget may deal with cash deficiencies? How can this affect their personal relationships?

> Suppose you want to change your budget to increase your savings. What could you do?

> Describe the process of creating an annual budget.

> List your monthly cash outflows. Will everyone have similar cash outflows?

> What are the six key components of a financial plan?

> Identify some factors that affect cash inflows.

> Ricardo wants a career where he can help people. He also wants to travel and see the world. He is thinking about becoming a personal care aide. What advice would you give him?

> Define cash inflows and cash outflows and identify some sources of each. How are net cash flows determined?

> What two personal financial statements are most important to personal financial planning?

> What are two factors that impact your cash inflows?

> Heather purchased a new car for $18,000 three years ago and listed the new car as an asset with a value of $18,000 on her personal balance sheet. She was able to borrow the entire $18,000 to purchase the car and listed the car loan as a liability with a

> Lena has just become eligible to participate in her company’s retirement plan. Her company does not match contributions, but the plan does average an annual return of 12%. Lena is 40 and plans to work to age 65. If she contributes $200 per month, how muc

> Justin’s stock portfolio increased in value during the year, and the balance on his mortgage declined. What happened to his net worth over the course of the year?

> What three financial characteristics can be monitored by analyzing your personal balance sheet?

> How does a personal balance sheet help you track your net worth?

> What are liabilities? Define current liabilities and long-term liabilities.

> Describe two ways real estate might provide a return on an investment.

> How does your choice of career impact your financial plan?

> Stephen is in a 15% marginal tax bracket. In 2015, he sold stock that he had held for nine months for a gain of $1,900. How much tax must he pay on this capital gain? How much would the tax be if he had held the stock for 13 months?

> How are unexpected expenses and liquidity related?

> How do you assess the accuracy of your budget? How can finding forecasting errors improve your budget?

> What is a budget? What is the purpose of a budget? How can a budget help when you are anticipating cash shortages or a cash surplus?

> Jeremey wants to increase his net worth. What advice would you give him?

> Jason’s car was just stolen, and the police informed him that they will probably be unable to recover it. His insurance will not cover the theft. Jason has a net worth of $3,000, all of which is easily convertible to cash. Jason requires a car for his jo

> Explain how credit card usage can impact your spending habits.

> Explain in logical terms why a weak economy can cause the net worth of individuals to decline.

> Explain in logical terms why values of assets such as homes and stocks may decline during a weak economy.

> What is the liquidity ratio? What does it indicate? How is the debt-to-asset ratio calculated? What does a high debt ratio indicate? How is your savings rate determined? What does it indicate?

> Michelle is attending college and has a part-time job. Once she finishes college, Michelle would like to relocate to a metropolitan area. She wants to build her savings so that she will have a “nest egg” to start her off. Michelle works out her budget an

> When does your net worth increase? Will the purchase of additional assets always increase your net worth? Why or why not?

> What are bonds? What are stocks? What are mutual funds? Describe how each of these provides a return on your investment.

> How can an understanding of personal finance benefit you?

> Using the information in problem 10, if Nick and Nora’s itemized deductions increase by $2,000, how will their taxable income be affected?

> Name three classifications of assets. Briefly define and give examples of each.

> Explain why it is important to select the right university or college.

> Nick and Nora are married and have three children in college. They have an adjusted gross income of $47,400. If their standard deduction is $12,600, itemized deductions are $14,200, and they get an exemption of $4,000 for each adult and each dependent, w

> How can peer pressure impact your spending habits?

> Margo is in the 39.6% marginal tax bracket. What is her tax liability on dividend income of $6,000?

> During a weak economy jobs are scarce, so some individuals may consider starting their own businesses. What is the disadvantage of this idea during a weak economy?

> Using the information in problem 14, if Tracy’s standard deduction is $6,300 and her exemption is $4,000, what is her taxable income?

> Assume that you have established a plan to achieve a particular level of wealth in three years, but the economic conditions suddenly cause both your existing income and the value of your existing assets to decline. Should you leave your financial plan as

> What is an opportunity cost? What might be some of the opportunity costs of spending $10 each week on the lottery?

> If Daniel (from problem 12) had forgotten a $1,000 tax credit (instead of a $1,000 tax deduction), how would his taxes be affected?

> Winners of the Georgia Lotto drawing are given the choice of receiving the winning amount divided equally over 20 years or as a lump-sum cash option amount. The cash option amount is determined by discounting the winning amount at 7% over 20 years. This

> Dave and Sharon Sampson are 30 years old and have two children, who are five and six years old. Since marrying seven years ago, the Sampsons have relied on Dave’s salary, which is currently $48,000 per year. They have not be

> List some information available on the Internet that might be useful for financial planning. Describe one way you might use some of this information for financial planning purposes.

> Why might you need to revise your financial plan?

> The IRS tax code allows for the deduction of expenses incurred in traveling to a job interview. Sean, Erica, and their two children have used this deduction to fund their vacations for the last eight years. Each year, several months prior to their vacati

> Once your financial plan has been implemented, what is the next step? Why is it important?

> Jauna made $178,400 in salary during 2015. How much were her FICA withholdings for that year?

> Jill has decided to save 50% of her income for retirement. Her father told her she needed to set a different goal. Why do you think he gave her this advice?

> Dawn’s adjusted gross income is $16,700. Dawn has $1,800 in unreimbursed medical expenses. How much can Dawn claim as an itemized deduction?

> Name some factors that might affect your current financial position.

> Brian makes $27,000 per year. How much can he expect to contribute to FICA taxes in 2015? How much will his employer contribute?

> Julia (from problem 1) is considering trading in her car for a new one. Her new car payment will be $325 per month, and her insurance cost will increase by $60 per month. Julia determines that her other car-related expenses (gas, oil) will stay about the

> Juan would like to give his newly born grandson a gift of $10,000 on his 18th birthday. Juan can earn 7% annual interest on a certificate of deposit. How much must he deposit now to achieve his goal?

> Emma’s adjusted gross income is $24,200. She has $1,800 in unreimbursed medical expenses. How much in medical expenses can Emma claim as an itemized deduction?

> How do your financial goals fit into your financial plan? Why should goals be realistic? What are three time frames for goals? Give an example of a goal for each time frame.

> Tracy is single and had an adjusted gross income of $37,000 in 2015. Tracy also has the following items: Unreimbursed medical expenses…………$3,000 State income tax…………………………………..1,850 Interest expense (first mortgage)………….3,040 Interest expense (second m

> What are the six steps in developing a financial plan?

> Jason and Mia are in their early 20s and have been married for three years. They are eager to purchase their first house, but they do not have sufficient money for a down payment. Mia’s Uncle Chris has agreed to loan them the money to purchase a small ho

> How does each element of financial planning affect your cash flows?

> Based on the information in Problems 9 and 10, what is Ryan and Nicole’s liquidity ratio? What is their debt-to-asset ratio? Comment on each ratio. Data from Problem 9: Ryan and Nicole have the following assets:

> What are the three elements of planning to protect your assets? Define each element.

> Jasmine has been saving for the past five years for a European vacation. Her vacation account currently has $5,000, and she is ready to book her trip. If she takes the vacation, what impact will it have on her net worth? Should she take the trip?

> Amy and Vince want to save $7,000 so that they can take a trip to Europe in four years. How much must they save each month to have the money they need if they can get 8% per year, compounded monthly, on their savings?

> How is your net worth calculated? Why is it important?

> Cheryl wants to have $2,000 in spending money to take on a trip to Disney World in three years. How much must she deposit now in a savings account that pays 5% per year to have the money she needs in three years?

> The purpose of this exercise is to introduce you to one of the online tools that are available to help with budgeting and financial planning. Go to http://www.mint.com, and review the information available on this Web site. Don’t sign up yet, although yo

> Ryan and Nicole (from Problem 9) have the following liabilities: / What are their current liabilities? What are their long-term liabilities? What is their net worth?

> What factors influence income? Why is an accurate estimate of expenses important in budget planning? How do tax laws affect the budgeting process?

> Ryan and Nicole have the following assets: Fair Market Value Home……………………..$85,000 Cars…………………….……22,000 Furniture…………………..14,000 Stocks……………………….10,000 Savings account………..…5,000 Checking account…….….

> Dave and Sharon Sampson want to determine their taxes for the current year. Dave will earn $48,000 this year, while Sharon’s earnings from her part-time job will be $12,000. Neither Dave nor Sharon contributes to a retirement plan at th

> Dave and Sharon Sampson want to determine their taxes for the current year. Dave will earn $48,000 this year, while Sharon’s earnings from her part-time job will be $12,000. Neither Dave nor Sharon contributes to a retirement plan at this time. Recall th

> List some common types of tax credits

> What is the difference between a tax deduction and a tax credit? Which is more valuable?

> Julia brings home $1,600 per month after taxes. Julia’s rent is $350 per month, her utilities are $100 per month, and her car payment is $250 per month. Julia is currently paying $200 per month to her orthodontist for her braces. If Julia’s groceries cos

> What is a marginal tax bracket? Why is it important?

> How is taxable income calculated?

> What two methods can be used to calculate future values?

> What is a standard deduction? What is the standard deduction based on?

> How are FICA taxes for self-employed individuals handled?

> What is an earned income credit? Explain why this credit is sometimes called a negative income tax.

> What is liquidity? What two factors are considered in managing liquidity? How are they used?

> How are same-sex couples treated for tax purposes?

> In the past, the federal government has implemented tax relief initiatives for various reasons. List some recent examples of targeted tax relief.

> How did the Affordable Care Act of 2010 affect tax filing?

> Anna has just received a gift of $500 for her graduation, which increased her net worth by $500. If she uses the money to purchase a tablet computer, how will her net worth be affected? If she invests the $500 at 4% interest per year, what will it be wor

> What is the purpose of income tax? Who administers the federal tax system?

> Which form must be filed with the IRS for itemized deductions?

> Do investors in a low tax bracket or a high tax bracket benefit to a greater degree from the long-term capital gains tax? Explain.

> Define compounding. How is it used in financial planning?

> Are your total medical expenses deductible? Explain.

> Distinguish between interest income and dividend income. Does their treatment differ for tax purposes?

> Which of the following would be included in gross income? Salary Prizes Business income Tips Veteran’s benefits Welfare benefits Alimony Dividend income Child support Interest income

> What are capital gains? When is a capital gain considered short term? When is it considered long term? Why is this distinction important?

> Jarrod (from Problem 7) has an old TV worth about $100. Jarrod’s other assets total about $150. What is Jarrod’s debt-to-asset ratio? What does this indicate about Jarrod’s financial position? Data from Problem 7: Jarrod is a college student. All of Ja

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