Income statement preparation Adam and Arin Adams have collected their personal income and expense information and have asked you to put together an income and expense statement for the year ended December 31, 2015. The following information is received from the Adams family

.

a. Create a personal income and expense statement for the period ended December 31, 2015. It should be similar to a corporate income statement.

b. Did the Adams family have a cash surplus or cash deficit?

c. If the result is a surplus, how can the Adams family use that surplus?

Adam's salary

$44,600

Utilities

$3,220

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Arin's salary

29,500

Groceries

2,240

Interest received

470

Medical

1,500

Dividends received

140

Property taxes

1,665

Auto insurance

610

Income tax, Social Security

12,700

Home insurance

710

Clothing and accesories

2,050

Auto loan payment

3,350

Gas and auto repair

2,120

Mortgage payment

13,500

Entertainment

1,970

2. Balance sheet preparation Adam and Arin Adams have collected their personal asset and liability information and have asked you to put together a balance sheet as of December 31, 2015. The following information is received from the Adams family .

a. Create a personal balance sheet as of December 31, 2015. It should be similar to a corporate balance sheet.

b. What must the total assets of the Adams family be equal to by December 31, 2015?

c. What was their net working capital (NWC) at the end of the year?

(Hint:

NWC is the difference between total liquid assets and total current liabilities.)

Cash	$300		Retirement funds, IRA	$2,017
Checking	2,910		2014 Sebring	15,058
Savings	1,260		2010 Jeep	7,982
IBM stock	2,058		Money market funds	1,227
Auto loan	8,020		Jewelry and artwork	2,974
Mortgage	99,304		Net worth	77,532
Medical bills payable	241		Household furnishings	4,146
Utility bills payable	149		Credit card balance	2,014
Real estate	150,404		Personal loan	3,076

Adam and Arin Adams
Balance Sheet
31-Dec-15
Assets	Liabilities and Net Worth
0	$
0	$
0	$
0	$
Total Liquid Assets	$
0	$
0	$
Total Investments	$
0	$
0	$
0	$
0	$
Total Personal Property	$
Total Real Estate	$
Total Assets	$

3. Liquidity ratioJosh Smith has compiled some of his personal financial data in order to determine his liquidity position. The data are as follows:

Account	Amount
Cash	$3,110
Marketable securities	970
Checking account	780
Credit card payables	1,260
Short-term notes payable	990

a. Calculate Josh's liquidity ratio.

b. Several of Josh's friends have told him that they have liquidity ratios of about

1.61.6. How would you analyze Josh's liquidity relative to his friends?

4. Preparation of cash budget. Personal finance problemSam and Suzy Sizeman need to prepare a cash budget for the last quarter of 2016 in order to make sure they can cover their expenditures during the period. Sam and Suzy have been preparing budgets for the past several years and have been able to establish specific percentages for most of their cash outflows. These percentages are based on their take-home pay (that is., monthly utilities normally run

5.2 %5.2%

of monthly take-home pay). The information here

can be used to create their fourth-quarter budget for 2016.

a. Prepare a quarterly cash budget for Sam and Suzy covering the months October through December 2016.

b. Are there individual months that incur a deficit?

c. What is the cumulative cash surplus or deficit by the end of December 2016?

Income

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Monthly take-home pay

$4,920

Expenses

Housing

30.3%

Utilities

5.2%

Food

10.5%

Transportation

7.4%

Medical/dental

0.5%

Clothing for October & November

2.7%

Clothing for December

$435

Property taxes (November only)

11.4%

Appliances

1.1%

Personal Care

1.9%

Entertainment for October & November

5.6%

Entertainment for December

$1,549

Savings

7.7%

Other

5.5%

Excess in cash

4.6%

Sam and Suzy Sizeman
Personal Budget
for the Period October-December 2016
		October
Income
Take-home pay		$
Expenses	Percent
Housing	30.30%	$
Utilities	5.20%	$
Food	10.50%	$
Transportation	7.40%	$
Medical/Dental	0.50%	$
Clothing	2.70%	$
Property taxes	11.40%	$
Appliances	1.10%	$
Personal care	1.90%	$
Entertainment	5.60%	$
Savings	7.70%	$
Other	5.50%	$
Excess cash	4.60%	$
Total expenses		$
Cash surplus or (deficit)		$
Cumulative cash surplus or (deficit)		$

5. Time valuePersonal Finance ProblemYou have $1,500 to invest today at 7% interest compounded annually.

a.Find how much you will have accumulated in the account at the end of (1) 5 years, (2) 10

years, and (3) 15 years.

b.Use your findings in part a to calculate the amount of interest earned in (1) the first 5 years (years 1 to

5), (2) the second 5 years (years 6 to 10), and (3) the third 5 years (years 11 to 15).

c.Compare and contrast your findings in part b.Explain how the amount of interest earned changes in each succeeding 5-year period.

6. Time valuePersonal Finance Problem You can deposit $7,000 into an account paying 7% annual interest either today or exactly 5 years from today. How much better off will you be at the end of 25 years if you decide to make the initial deposit today rather than 5 years from today?

The future value at the end of 25 years if you deposit $7,000 at 7% today is

$nothing . (Round to the nearest dollar.)