Question

Creating a Balance Sheet based on the information below:

A couple, Timmy and Jenny have come to see you regarding their financial situation. Timmy works for a consulting firm earning $80,000 per annum (take home pay of $2286.47 per fortnight after tax and other deductions). Jenny is currently a stay home mother taking care of their one-year-old child, which saves them in child care expenses of $450 per week. Before having the baby, Jenny worked as an early childhood teacher earning $45,000 per year ($1401.00 after tax and other deductions). They know that money has been tight and they have only saved $3,000 in a current account.

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Timmy and Jenny have provided the following information to you:  

- The couple are currently renting a house which is costing them $450 per week.

-They have two cell phones each on $40 per month plans

- Power bills estimated to be $150 per month

- Internet and phone plan cost them $70 per month

- They spend about $150 per week on incidental expenses like clothing and entertainment

- Food costs them about $150 per week

- Timmy buses to work with his monthly bus pass costing $120 per month

- The couple also have a car that they have just bought for $15,000 with a 5-year loan at 14.75%. The car comes with costs of $287.75 per year for registration and needs two warrants of fitness per year costing $60 each

- They spend $25 per week on petrol

- The car is now worth $12,000

- In terms of debt, they have $7,000 of personal loan which they pay 151.67 per month.

- They also recently replaced some household appliances and so have hire purchase debt of $4,600 which is costing them $150 per fortnight in repayments for the next 3 years

- Both the personal and hire purchase have interest rates of 22.5%

- The value of their household items, including their hire purchase items is $15,000

- Timmy has accumulated $1750 in his Rabosaver (a type of saving account) fund account.

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Based on the above information, calculate:

1) Timmy and Jenny's Asset, Liability, and Net Worth (Balance Sheet)

Answer 1

	Balance Sheet as at the year end:
	Liabilities:	$	$
	Car Loan	15,000
	Hire purchase loan	4,600
	Personal Loan	6,755		(7000-245.04)
	Total Liabilities		11,355
	Networth (Equity)		20,395	(Total assets-11355)
	Total Liabilities + networth		31,750
	Assets:	$
	Savings bank balance	1,750
	Current account balance	3,000
	Value of house holds	15000
	Value of Car	12,000		(cost-depreciation)
	Total Assets		31,750
	To Note:
	a. Balance sheet prepared with the data given
	b. total expenses incurred has been given
	c. New loans (car loan & Hire purchase) are taken at same value
	as they are recently taken and hence entire loan is outstanding
	d. Personal loan outstanding at the beginning of the year is taken at 7000$
	e. 52 weeks are considered in a year
	f. Net worth = Total Assets - Liabilities g. Income statement is not asked and hence not drafted

Notes for reference:

1	childcare expense savings is not relevant
2	total savings of the family till date is $3000
3	Expenses for the year:
	23400	Rent - (450*52 weeks)
	960	Phone (40*2*12)
	1800	Power (150*12)
	840	Internet (70*12)
	7800	Incidental exp (150*52 weeks)
	7800	Food expense (150*52)
	1440	Bus pass cost (120*12)
	287.75	Car Expense: Regn
	1300	fuel (25*52weeks)
	120	fitness cost (60*2)
	3000	Depn (15000-12000)
	48747.75	Total
4	Interest on Personal loan
	Loan amount o/s		7000
	Interest @22.5%		1575
	Total payment made		1820.04	(151.67*12)
	Principal repaid		245.04	(total payment - interest)
5	Hire purchase debt:
	Loan amount		4600
	fortnightly instalment		150
	(as the debt is taken recently, it is taken that entire amount is outstanding)
6	Value of households:			15000
7	Car Loan
	Loan amount		15000
	Interest on loan (15000*14.75%)
	(as the loan is taken recently, no EMI is deducted and entire loan is outstanding)
8	Accumulated savings account balance $				1750