A RETIREMENT PLANNING MINI-CASE / TUTORIALOUTLET DOT COM A RETIREMENT PLANNING MINI-CASE / TUTORIALOUTLET D | Page 6

2. Which of the following statements is true?
I. Peter must report $110 in § 79 income for tax purposes.
II. Because Peter is over age 50, he does not need to report § 79
income.
III. § 79 income helps reduce a client’s taxable income.
IV. § 79 income should be accounted for as a taxable expense on the
income and expense statement.
a. II only
b. I and II only
c. I and IV only
d. II and III only
e. II, III, and IV only
3. How much of the Mayfields’ gross income is considered total
income for tax purposes on IRS Form 1040?
a. $96,110
b. $90,000
c. $86,510
d. $80,510
4. All of the following statements about the Mayfields’ level of
discretionary cash flow are incorrect except:2
a. After paying all dedicated and discretionary expenses, the
Mayfields have a negative cash flow.
b. Total dedicated expenses are greater than discretionary expenses.
c. Savings expenses make up the largest dedicated/fixed expense item
for the Mayfields.
d. The Mayfields’ savings ratio, including employer matching
contributions, exceeds 10%.
5. Which of the following are strengths related to the Mayfields’
financial situation?
a. Their savings rate, as measured by the savings ratio, is acceptable at
this time.
b. Their debt as a percentage of net worth is low as measured by
industry ratios.
c. They could easily pay off all of their debt using monetary assets.
d. All of the above.
6. Which of the following is true?
a. The Mayfields should choose to itemize deductions on IRS Form