Accounting and Finance Foundations

Unit 10

Accounting and Finance Foundations Unit 10: Credit 801

CreditOpen-Response Unit Assessment

Skill Standards

Academic:

AB 6 Demonstrate the ability to write clearly and concisely using industry specific technology

AC 3 Implement effective decision-making skills

AD 1 Perform basic and higher level math operations (e.g., addition, subtraction, multiplication, division,

decimals, fractions, units of conversion, averaging, percentage, proportion, ratios)

AE 1 Locate, evaluate, and apply personal financial information

AE 4 Use financial services effectively

Employability:

EG 4 Locate and verify information

Accounting:

OA 8 Analyze credit transactions and laws governing these functions

Financial Services:

OB 1 Define credit and credit terms

OB 3 Possess general knowledge of the following: checking, savings, loans, certificates of deposit,

investments, IRAs, customer services, trust services, ATMs, credit/debit card

Scenario

Joey Smith, who is 21 years old and a junior at Kentucky State University, wants to open his first credit-

card account. He has $11,221 in his savings account, and his annual income as a waiter is $23,250.

Although his parents pay his college tuition and room and board, he would prefer not to use either of them

(or anyone else) as a cosigner on the credit-card account.

Tasks

A. Write a letter to Joey explaining what steps he should take to open a credit-card account. Identify

information that the bank or credit-card company is likely to need. Finally, explain the three C’s of

credit to Joey, and identify how they relate to him personally.

B. Assume that Joey has been approved for a credit line of $2,500. His plan is to purchase $100 in

groceries on credit every month—and pay the $100 back in full each month. One day, Joey sees

a pair of athletic shoes at the mall that are on sale for 25% off the retail price of $210. Joey has

wanted these shoes for a long time. In fact, his parents have promised to purchase them for Joey

as a graduation gift next year. However, Joey is very tempted to use his credit card to buy the shoes

today, while they are on sale. Explain (in writing) the advantages and disadvantages of purchasing

the shoes today. Also, indicate what you would do if you were Joey.

S/T Guide