4. Preparing Income and Expense Statement: Use Worksheet 2.2. Robyn and Matthew Scott are about to construct their income and expense statement for the year ending December 31, 2020. They have put together the following income and expense information for 2020: Robyn's salary Reimbursement for travel expenses $57,000 1,950 Interest on: Savings account Bonds of Alpha Corporation 110 70 650 280 Groceries 4,150 Rent 9,600 Utilities 960 Gas and auto expenses Matthew's tuition, books, and supplies 13,300 Books, magazines, and periodicals Clothing and other miscellaneous expenses 2,700 Cost of photographic equipment purchased with charge card 2,200 Amount paid to date on photographic equipment 1,600 Robyn's travel expenses 1,950 Purchase of a used car (cost) 9,750 Outstanding loan balance on car 7,300 Purchase of bonds in Verizon Communication Inc 4,900 Using the information provided, prepare an income and expense statement for the Scotts for the year ending December 31, 2020 (follow the form shown in Worksheet 2.2). See worksheet on following page. Issues: Purchase of bonds is a balance sheet transaction, a non-recurring conversion of cash to investment in bonds. There is no expense, there is no impact on net worth The payment of the auto loan could be left off the expense statement since it is a reduction of an asset and a liability. However, the loan payment is a recurring item and reporting it as an expense helps explain the change in cash. The determining factor is the recurring nature and impact on net worth. The goal of all financial statements is to provide information. If the reader of the statement needs to know about a transaction, that transaction should be on the financial statement Robyn's travel expenses are off set by the reimbursement. There is no impact on net worth. However, it is a recurring transaction and reporting it helps explain the change in the cash account Reporting the expense may also remind Robyn of an item that has not been reimbursed INCOME AND EXPENSE STATEMENT 3 Name(s) 4 For the IEnded Income 8 Wages and salaries Name: Name: 10 11 Self-employment income 12 Bonuses and commissions 13 Investment income 15 Interest received Dividends received Rents received Sale of securities Other 16 17 19 Other income (0) Total Income $ 20 21 Expenses 22 Housing 24 25 Utilities Rent/mortgage payment (include insurance and taxes, if applicable) Repairs, maintenance, improvements Gas, electric, water Phone Cable TV and other Groceries Dinine out Auto loan payments License plates, fees, etc. 28 Food 30 Transportation 31 In i ic - tiro to - 26 27 32 DEF Repairs, maintenance, improvements 25 Utilities Gas, electric, water Phone Cable TV and other 28 Food Groceries 29 Dining out 30 Transportation Auto loan payments License plates, fees, etc. Gas, oil, repairs, tires, maintenance 33 Medical Health, major medical, disability insurance (payroll deductions or not provided by employer) Doctor, dentist, hospital, medicines 36 Clothing Clothes, Shoes, and accessories 37 Insurance Homeowner's (if not covered by mortgage payment) 38 Life (not provided by employer) Auto 40 Taxes Income and social security 41 Property (if not included in mortgage) 42 Appliances, furniture, and other Loan payments 43 major purchases Purchases and repairs 44 Personal care Laundry, cosmetics, hair care 45 Recreation and entertainment Vacations 46 Other recreation and entertainment 47 Other items 48 (II) Total Expenses S CASH SURPLUS (OR DEFICIT) (0-1)] $ 3. Preparing Personal Balance Sheet: Use Worksheet 2.1 Katie Wright's banker has asked her to submit a personal balance sheet as of June 30, 2020, in support of an application for a $6,000 home improvement loan. She comes to you for help in preparing it. So far, she has made the following list of her assets and liabilities as of June 30, 2016: $ 70 180 Cash on hand Balance in checking account Balance in money market deposit account with Southwest Savings $ 20 Bills outstanding: Telephone Electricity Charge account balance Visa MasterCard Taxes Insurance 190 180 220 400 220 1,300 Condo and property Condo mortgage loan Automobile: 2016 Honda Civic 68,000 52.000 14,400 Installment loan balances: Auto loans Furniture loan 3.000 500 3,500 Personal property: Furniture Clothing 1,050 900 1,950 Investments U.S. government savings bonds Apple Stock 500 3,000 3,500 From the data given, prepare Katie Wright's balance sheet, dated June 30, 2020 (follow the balance sheet form shown in Worksheet 2.1). Then evaluate her balance sheet relative to the following factors: (a) solvency, (b) liquidity, and (c) equity in her dominant asset. See following page for Worksheet 2.1 for Denise Fisher BALANCE SHEET Date February 9, 2020 LIABILITIES ASSETS S 5 6 Liquid Assets 7 Cash on hand s 8 In checking 9 Savings accounts 10 Money market 11 funds and deposits Certificates of deposit 12 (1 yr. to maturity) 21 Mutual funds 22 23 Real estate 24 Retirement funds, IRA 25 Other 26 Total Investments 27 Real Property 28 Primary residences Total Current Liabilities Long-Term Liabilities Primary residence mortgage Second home mortgage Real estate investment 15 Stocks 17 Bonds Travel and entertainment card balances Gas and other credit card balances Bank line of credit balances Other current liabilities 19 Certificates of deposit 20 >1 yr. to maturity) 21 Mutual funds 22 23 Real estate 24 Retirement funds, IRA 25 Other 26 Total Investments 27 Real Property 28 Primary residence 29 Second home 30 Other 31 Total Real Property 32 Personal Property 33 Auto(s): 34 Auto(s): 35 Recreational vehicles 36 Household furnishing 37 Jewelry and artwork 38 Other 39 Other Total Personal Property 40 Total Current Liabilities Long-Term Liabilities Primary residence mortgage Second home mortgage Real estate investment mortgage Auto loans Appliance/furniture loans Home improvement loans Single-payment loans Education loans Margin loans Other long-term loans Total Long-Term Liabilities (11) Total Liabilities $ Net Worth (0 - 1)] $ (Total Assets Total Liabilities and Net Worth $ 4. Preparing Income and Expense Statement: Use Worksheet 2.2. Robyn and Matthew Scott are about to construct their income and expense statement for the year ending December 31, 2020. They have put together the following income and expense information for 2020: Robyn's salary Reimbursement for travel expenses $57,000 1,950 Interest on: Savings account Bonds of Alpha Corporation 110 70 650 280 Groceries 4,150 Rent 9,600 Utilities 960 Gas and auto expenses Matthew's tuition, books, and supplies 13,300 Books, magazines, and periodicals Clothing and other miscellaneous expenses 2,700 Cost of photographic equipment purchased with charge card 2,200 Amount paid to date on photographic equipment 1,600 Robyn's travel expenses 1,950 Purchase of a used car (cost) 9,750 Outstanding loan balance on car 7,300 Purchase of bonds in Verizon Communication Inc 4,900 Using the information provided, prepare an income and expense statement for the Scotts for the year ending December 31, 2020 (follow the form shown in Worksheet 2.2). See worksheet on following page. Issues: Purchase of bonds is a balance sheet transaction, a non-recurring conversion of cash to investment in bonds. There is no expense, there is no impact on net worth The payment of the auto loan could be left off the expense statement since it is a reduction of an asset and a liability. However, the loan payment is a recurring item and reporting it as an expense helps explain the change in cash. The determining factor is the recurring nature and impact on net worth. The goal of all financial statements is to provide information. If the reader of the statement needs to know about a transaction, that transaction should be on the financial statement Robyn's travel expenses are off set by the reimbursement. There is no impact on net worth. However, it is a recurring transaction and reporting it helps explain the change in the cash account Reporting the expense may also remind Robyn of an item that has not been reimbursed INCOME AND EXPENSE STATEMENT 3 Name(s) 4 For the IEnded Income 8 Wages and salaries Name: Name: 10 11 Self-employment income 12 Bonuses and commissions 13 Investment income 15 Interest received Dividends received Rents received Sale of securities Other 16 17 19 Other income (0) Total Income $ 20 21 Expenses 22 Housing 24 25 Utilities Rent/mortgage payment (include insurance and taxes, if applicable) Repairs, maintenance, improvements Gas, electric, water Phone Cable TV and other Groceries Dinine out Auto loan payments License plates, fees, etc. 28 Food 30 Transportation 31 In i ic - tiro to - 26 27 32 DEF Repairs, maintenance, improvements 25 Utilities Gas, electric, water Phone Cable TV and other 28 Food Groceries 29 Dining out 30 Transportation Auto loan payments License plates, fees, etc. Gas, oil, repairs, tires, maintenance 33 Medical Health, major medical, disability insurance (payroll deductions or not provided by employer) Doctor, dentist, hospital, medicines 36 Clothing Clothes, Shoes, and accessories 37 Insurance Homeowner's (if not covered by mortgage payment) 38 Life (not provided by employer) Auto 40 Taxes Income and social security 41 Property (if not included in mortgage) 42 Appliances, furniture, and other Loan payments 43 major purchases Purchases and repairs 44 Personal care Laundry, cosmetics, hair care 45 Recreation and entertainment Vacations 46 Other recreation and entertainment 47 Other items 48 (II) Total Expenses S CASH SURPLUS (OR DEFICIT) (0-1)] $ 3. Preparing Personal Balance Sheet: Use Worksheet 2.1 Katie Wright's banker has asked her to submit a personal balance sheet as of June 30, 2020, in support of an application for a $6,000 home improvement loan. She comes to you for help in preparing it. So far, she has made the following list of her assets and liabilities as of June 30, 2016: $ 70 180 Cash on hand Balance in checking account Balance in money market deposit account with Southwest Savings $ 20 Bills outstanding: Telephone Electricity Charge account balance Visa MasterCard Taxes Insurance 190 180 220 400 220 1,300 Condo and property Condo mortgage loan Automobile: 2016 Honda Civic 68,000 52.000 14,400 Installment loan balances: Auto loans Furniture loan 3.000 500 3,500 Personal property: Furniture Clothing 1,050 900 1,950 Investments U.S. government savings bonds Apple Stock 500 3,000 3,500 From the data given, prepare Katie Wright's balance sheet, dated June 30, 2020 (follow the balance sheet form shown in Worksheet 2.1). Then evaluate her balance sheet relative to the following factors: (a) solvency, (b) liquidity, and (c) equity in her dominant asset. See following page for Worksheet 2.1 for Denise Fisher BALANCE SHEET Date February 9, 2020 LIABILITIES ASSETS S 5 6 Liquid Assets 7 Cash on hand s 8 In checking 9 Savings accounts 10 Money market 11 funds and deposits Certificates of deposit 12 (1 yr. to maturity) 21 Mutual funds 22 23 Real estate 24 Retirement funds, IRA 25 Other 26 Total Investments 27 Real Property 28 Primary residences Total Current Liabilities Long-Term Liabilities Primary residence mortgage Second home mortgage Real estate investment 15 Stocks 17 Bonds Travel and entertainment card balances Gas and other credit card balances Bank line of credit balances Other current liabilities 19 Certificates of deposit 20 >1 yr. to maturity) 21 Mutual funds 22 23 Real estate 24 Retirement funds, IRA 25 Other 26 Total Investments 27 Real Property 28 Primary residence 29 Second home 30 Other 31 Total Real Property 32 Personal Property 33 Auto(s): 34 Auto(s): 35 Recreational vehicles 36 Household furnishing 37 Jewelry and artwork 38 Other 39 Other Total Personal Property 40 Total Current Liabilities Long-Term Liabilities Primary residence mortgage Second home mortgage Real estate investment mortgage Auto loans Appliance/furniture loans Home improvement loans Single-payment loans Education loans Margin loans Other long-term loans Total Long-Term Liabilities (11) Total Liabilities $ Net Worth (0 - 1)] $ (Total Assets Total Liabilities and Net Worth $