Question
INCOMEJanuary 1 to December 31, 2010 Salary (Kevin) $ 42,000 Bonuses $ 0 Salary (Megan) $ 19,000 Bonuses $ 0 Consulting income (Megan) $ 5,000
INCOMEJanuary 1 to December 31, 2010
Salary (Kevin) |
$ 42,000 |
Bonuses |
$ 0 |
Salary (Megan) |
$ 19,000 |
Bonuses |
$ 0 |
Consulting income (Megan) |
$ 5,000 |
Interest[1] |
$ 200 |
Dividends[2] |
$ 975 |
Capital gains distributions[3] |
$ 3,197 |
Monthly salary after deductions:
Kevin Megan
Gross salary $ 3,500 $ 2,000
Income tax withholding 637 165
CPP 155 64
EI 63 31
Net salary $ 2,645 $ 1,740
Note: Megan will receive the consulting income monthly - $417.
EXPENSES--January 1 to December 31, 2010
|
Cash Flow Monthly |
Cash Flow Annually |
Rent |
$850 |
$10,200 |
Utilities (included in rent) |
0 |
0 |
Telephone ($35) and cable TV ($45) |
80 |
960 |
Groceries |
300 |
3,600 |
Food away from home |
170 |
2,040 |
Auto loan payments |
403 |
4,836 |
Auto maintenance (gas, repairs, licenses, etc.) |
165 |
1,980 |
Medical/dental expenses (not covered by insurance) |
50 |
600 |
Clothing |
225 |
2,700 |
Contributions to GRRSP |
175 |
2,100 |
Auto insurance |
75 |
900 |
Income tax withholding |
802 |
9,624 |
CPP |
219 |
2,628 |
EI |
94 |
1,128 |
Appliance, furniture, and equipment purchases |
|
1,500 |
Personal care |
50 |
600 |
Entertainment |
200 |
2,400 |
Vacations |
|
1,000 |
Education expenses (books and supplies) |
150 |
1,800 |
Charitable contributions |
25 |
300 |
Gifts ($35/mo. Jan. through Oct., $400/mo. Nov. and Dec.) |
|
1,150 |
Reinvested interest, dividends, and capital gains distributions |
|
4,372 |
Education loan payments ($515 is interest paid) |
189 |
2,268 |
Computer loan payments |
93 |
1,116 |
Minimum payments on credit cards |
275 |
3,300 |
Miscellaneous |
100 |
1,200 |
[1]ING Direct accounts. Interest will be left in accounts to accumulate.
[2]Templeton Growth Fund. Dividends will be reinvested.
[3]Templeton Growth Fund. Distributions will be reinvested.
Using the income and expenditure information for 2010, complete an income and expenses statement for Megan and Kevin. Use the "cash flow" concept for this financial statement including all money inflows as income and all outflows as expenditures. Did Megan and Kevin have a cash surplus or a cash deficit in 2010? (10 marks)
QUESTIONS
1. What impact does the 2010 cash surplus (deficit) have on the following years (January 1, 2011) balance sheet? (2 marks)
2. Based on Megan and Kevin's financial statements, calculate the following ratios:
Savings ratio Liquidity ratio
Solvency ratio Debt service ratio (4 marks)
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