In: Finance
Bill and Debra Jones
In this case you will be preparing – calculating financial reports and information in order to assess the Jones’s financial situation and needs.
First you need to see where they are right now.
Bill Jones 45, and Debra Jones 42 are married with two children ages 6 and 3.
Bill earns $64,000 a year as a school teacher. Debra currently works part time earning $16,000 a year. She is also going to college part time to earn a nursing degree. The college tuition is $3,200 per year she anticipates earning $60,000 when she graduates in 2 years.
Their residence is appraised for tax purposes at $300,000 and has a $197,000 mortgage, and is pretty good condition. The monthly mortgage payment is $1,475, which includes $170 for property taxes and $75 for homeowners insurance and $25 for community association dues. Mortgage interest for this year is estimated to be $9800.
The Jones’s have a checking account that averages $2,500., a $6,500. savings account, 500 shares of Apple Inc. common stock which was left to Debra by her uncle, Bill has an IRA with a current balance of $97,000, he also is a participant in his employers 401 K plan with a $50,000 balance. His pretax monthly contribution to the 401 K $100. They have two automobiles that currently have a fair market value of $22,000; one has a 9,000, loan balance with monthly payments of $260 for another 2 years. Their personal property (furniture, clothing appliances etc.) is valued at $33,000.
Bill has a private term life insurance policy of $100,000,
premium is $220 per year, and is covered by group term life
insurance with his employer of $100,000. These policies provide
only a death benefit.
The family is covered by employer group health plan (PPO) that
covers the family and costs $260 per month, which is deducted from
Bill’s pay. Annual homeowner’s insurance premium is
$900, automobile insurance premium $2,200. The liability limits on
the automobile insurance is state’s minimum at 50/50/100. Neither
have any disability insurance.
Average monthly expenditures are; groceries $330, Visa credit
card of $100. (Outstanding balance is $2,500) Utilities, electric
and Gas $160, water and sewer $40, Telephone internet and cable
$80, Cell phones $100. Auto maintenance including fuel $110,
Clothing, entertainment, eating out, etc. and other miscellaneous
expenditures $130 per month, co pays on medical and dental are $600
annually. Maintenance on the residence is $50 per month. Annual
charitable donations are $600.
Bill and Debra’s estimated annual Federal and State income taxes
are $3,220 and $900, while Debra’s is $700 and $300 respectively.
Bill and Debra Jones Case 1 Prepare and
evaluate the Jones’s Statement of Financial Condition (Balance
Sheet) and Statement of Cash Flows (Budget) in good presentation
form.
Comment on their Financial Condition and their Budget
Cash Flow statement | |||
Income (Bill & Debra) | $ 80,000 | Income | |
Total Income | $ 80,000 | ||
Debra Tution fees | $ (3,200) | Expenses | |
Mortgage Payment | $ (17,700) | Expenses | |
Pre tax Monthly Contribution | $ (1,200) | Expenses | |
Insurance Premium | $ (220) | Per Year | Expenses |
PPO | $ (3,120) | Expenses | |
Annual Homeowner Insurance | $ (900) | Expenses | |
Automobile insurance | $ (2,200) | Expenses | |
Average Monthly Expenditure | $ (49,200) | Expenses | |
Medical and dental | $ (7,200) | Expenses | |
Charitable donation | $ (7,200) | Expenses | |
Bill Annual Federal & State Income taxes | $ (2,320) | Expenses | |
Debra Annual Federal & State Income taxes | $ (400) | Expenses | |
Total Expenses | $ (94,860) | ||
Net cashflow | $ (14,860) | ||
Balance Sheet | |||
Personal Property | $ 33,000 | Asset | |
Residence Value | $ 300,000 | Asset | |
Savings Account | $ 2,500 | Asset | |
Apple Shares | $ 6,500 | Asset | |
IRA | $ 97,000 | Asset | |
401K Balance | $ 50,000 | Asset | |
Automobiles | $ 31,000 | Asset | |
Total Asset | $ 520,000 | ||
Mortgage - Home | $ (197,000) | Liability | |
Credit card Balance | $ (2,500) | Liability | |
Loan Balance | $ (6,240) | Liability | |
Total Liability | $ (205,740) | ||
Net worth | $ 314,260 |
Cash Flow looks Negative Since Debra is anticipating additional income in two years,It will help them to turn their Negative into Positive in another two years.Since Balance sheet has Positive Net worth- they can use their savings for another two years to offset the negative cashflow