Review for Unit 2 Test-Personal Finance

Diana and Aaron have decided to develop a spending plan to help them gain control over their finances. Which of the following statements is NOT TRUE about spending plans?

• Spending plans are used to record planned income.
• Spending plans are used to record planned expenses.
• A spending plan includes items NOT usually included when creating a budget.
• When creating a pending plan, it is recommended that you examine your trade‐offs and opportunity costs.

When is your spending plan complete?

•  When you have allocated all your income into categories for the month.
• When you have all of your current income and expenses recorded.
• Spending plans are always under revision so they are never complete.
• Spending plans are complete each December 31st as one year ends and another year begins.
  

Chase has decided to work with a spending plan so he can build up an emergency fund for when he is in college. He learned in class that he could probably reduce his spending the most by looking at his non‐contractual expenses. Which of his expenses best fit that category?

• Cell phone bill, gasoline, and car payment
• Internet bill, entertainment, and clothing
• Motorcycle payment, food, and cell phone bill
• Gasoline, food, and entertainment

Michael wants to develop a spending plan for himself to use during his final year of high school.  What will he need to do as his FIRST step?

• Decide what income and spending categories would reflect his values, needs, and wants.
• Decide how much money he can spend for each of the bills he pays each month.
• Track his current income and expenses. If he has already created an Income and Expense Statement then he has completed this step.
• Develop a control system that will work with his life style.

Erin and her mother are putting together an Income and Expense Statement for Erin to use as she applies for a college scholarship. Which income source does she NOT need to include for this statement?

• Interest earned on her savings account
• Money she received from her grandparents for her birthday.
• Social Security income her mother is receiving for her since her father died of cancer last year.
• Taxes she paid based on her income last year.

Which of the following would most likely be considered a contractual expense?

• Cell Phone
• Food
• Entertainment
• Clothing

Andy is developing an Income and Expense Statement. He has gathered all his receipts, bank statements, paycheck stubs, and spending records. He needs to categorize them into income and expenses. He is unsure which of the following items should be recorded as expenses. Which should be recorded as expenses?

• Taxes deducted from his paycheck, money saved from his paycheck for emergencies, and his car insurance
• Money saved from his paycheck for emergencies, interest paid on his car loan, his tax refund from filing last year’s tax return
• The scholarship he receives for studying Chinese at the local community college, his car insurance payment, and stock dividends he received from his grandmother
• Clothing he purchased for a job interview, tuition for a class he is taking at the local community college, and interest from his savings account

Amanda and Marcus just finished their Income and Expense Statement for last month. They discovered that they have a net gain. What does this mean and what should they do?

• Amanda and Marcus are spending more money than they are earning. They need find a way to balance their income and expenses by spending less on non‐contractual expenses.
• Amanda and March are earning more money than they are spending. They could place additional money in savings and/or spend it on other expenses.
• Amanda and Marcus are spending more money than they are earning. One of them should consider getting a second job for a time to help boost their income.
• Amanda and Marcus are earning more money than they are spending. They should increase spending for non‐contractual items to bring their income into balance with the expenses.

Brett is creating a Statement of Financial Position and needs to list his assets. Which of the following should he NOT list as an asset?

• Money in his checking account
• Money in the paycheck he will receive next week
• His hockey equipment
• The market value of his car

To calculate her net worth Jordyn should use the following formula:

• Assets – liabilities = net worth
• Assets x liabilities = net worth
• Assets + liabilities = net worth
• Assets / liabilities = net worth