Adapted from Gitman and Joehnk (2005) Financial Statements, Budgeting and Planning: The Smith's are a married couple in their mid-20's. Jane is an associate at a small ufacturing firm in the suburbs. His gross salary law firm in downtown Chicago. Her gross salary is $132,000. Her husband John is is $61,000. worth of about $55,000, primarily as a result of rising home prices increasing the ame human resources associate at a large manufacturing firm in the suburbs. His gross salary Since getting married three years ago, they have been living comfortably Their income has consistently exceeded their expenses and they have accumulated a net ount of equity in their downtown condo that they purchased after their wedding. As a result o ot having any cash flow issues, Jane and John have done no financial planning beyond making sure there is money eft in the bank at the end of the month. Jane has just learned she is pregnant. They are excited about the prospect of having a child but are concerned about how they will make ends meet if, as they had always talked about, John stays at home to run the household and be the primary caretaker of the child. Jane has no aspirations to stay home and is seen as a rising star within her firm. She hopes to make partner in 7-8 years Each time that Jane broaches the topic of financial planning with John, he replies that "don't worry, we've always paid the bills on time." Since John's income would go y completely, Jane is not satisfied with this conclusion. Together, they document their financial situation by using the balance sheet they built one year ago and a listing of expenses incurred during the last year. Since they primarily use a debit card, this information was easily pulled from their bank statements. Your Assignment: I. Create an income and expense statement based on the information given to you for activity over the last year. Remember, since an I&E statement reflects past history, this statement should reflect what was going what would happen if she quit. 2. Using last year's balance sheet and the income and expense stater ment from #1 create a new balance sheet that reflects their financial position today 3. Create a forward-looking budget based on the income and expense statement format which would reflect their situation if John quit, they incurred $12,000 n expenses related to the new were made. baby and no other changes to their spending habits 4. Create an additional column on the budget created in #3 which reflects five or more reasonable and viable changes you think John and Jane can make which will
