The Beckers have been living well as a married couple with two incomes. However, Evelyn Becker is pregnant and wants to quit working the day she has the baby. The due date is the end of the year, and you can assume she does not work any in the next forecasted year. Terry Becker assumes that he will receive a 10% raise next year.

Construct their balance sheet, income and expense statement based on the below information. Construct their forecasted budget. (Note this is similar to what you need to do for Project 1 except this problem gives all the information and you do not need a written report)

Answer the following questions:

What is their net worth?

What is the cash surplus or deficit?

What is their solvency ratio, liquidity ratio, and savings rate?

Assuming Evelyn stops working, will they be able to save and invest $10,000 next year?

Salary Annual Total

Terry $76,000

Evelyn 42,000

Item Amount Total

Stock dividends Received $400 ($200 received in June and $200 in December)

Food 5,902 (paid monthly)

Clothing purchases 2,300 (paid monthly)

Mortgage payments 15,028 (paid monthly)

Travel and entertainment card balances 2,000

Gas, electric, water expenses 1,990 (paid monthly)

Household furnishings estimated value 4,500

Telephone payments 600 (paid monthly)

Auto Loan Balance 4,650

Common stock market value 7,500

Bank credit card balances 675

Federal Income Taxes 22,472 (paid monthly)

State Income Tax 5,040 (paid monthly)

City Income Tax 2,100 (paid monthly)

Social Security Tax 9,027 (paid monthly)

Credit card payments 2,910 (paid monthly)

Property Taxes 5,000 ($2,500 paid in January and $2500 paid in June)

Cash on hand 85

Nissan Sentra purchase price (4years ago) 22,000

Nissan Sentra estimated value 10,500

Unreimbursed medical expenses 650 (paid monthly)

Insurance premiums paid 1,400 ($700 paid in June and $700 paid in December)

Transportation (gas, etc.) 2,800 (paid monthly)

Checking account balance 585

Cable expenses 600 (paid monthly)

Market value of home 185,000

Trip to Europe 5,150 (paid in full in June)

Recreation and Entertainment 4,000 (paid monthly)

Auto Loan payments 5,150 (paid monthly)

Money market account balance 2,500

Purchase of common stock 7,400 (paid in March)

Mortgage on home 148,000

Assumptions for Forecast

Terry will receive 10% raise in salary.

Evelyn will have no income.

Take home pay = Gross Salary income and social security taxes

To offset the expected higher costs with a baby and increases in prices, leave last years expenses (including taxes) fixed for the next year.

Based on above, you do not need to compute revised taxes.

Due to the baby, they will not travel to Europe.