What is net worth create balance sheet, Financial Accounting

Gary and Joyce Yau, both 30, last month bought their dream house in London, Ontario. The purchase price was $450,000 plus addition fees such as taxes, legal fees, administration fees etc., of $10,000. They paid $100,000 cash-part of it from their savings and the rest was a gift from the parents---and borrowed a mortgage of $360,000 from the local bank. They find it very difficult to keep up with the monthly mortgage payments of $1,800, and have approached you for advice. The following is a summary of their financial situation:

Cash in chequing account                              $600

RRSPs                                                        $14,000

Five year GIC maturing this month               5,000

Mutual Fund                                               $31,000

Two cars                                                   $15,000

Personal Assets                                         $20,000

Joyce inherited the mutual fund a few years ago when her aunt died.  Although it does not pay dividends, she would really like to keep it, but she is willing to sell if it helps their financial situation.

Both work for small companies near their home and they have a combined take home pay of $80,200. They do not have any pension plans or other benefits.  They plan to have children in the next few years.  Their marginal tax rate is about 35%.  They have outstanding balances on three credit cards:  Visa ($21,000 @18% interest); Master Card ($11,000 @16% interest); and a department store charge card ($4,000 @24% interest). They are currently paying on these cards only the minimum payment of about $1,100 per month. On top of the credit cards, there is still a car loan with an outstanding balance of $5,500 @6% interest, and monthly payment of $450. They spend freely, and live from one pay cheque to another. They find saving money very difficult. They can borrow money at 6% interest for investment purposes.

Required:

a)  What are the most important areas of personal financial management for Gary and Joyce?

b)  What is their net worth?   Do not create a complete balance sheet.

c)  Give seven specific recommendations on personal financial management. Support your recommendation with calculations and/or explanations.

d)  Show how much interest and taxes they can save, if they ‘convertâ€TM their consumer loan to an investment loan as per the guideline in the textbook.

Posted Date: 3/29/2013 1:05:27 AM | Location : United States







Related Discussions:- What is net worth create balance sheet, Assignment Help, Ask Question on What is net worth create balance sheet, Get Answer, Expert's Help, What is net worth create balance sheet Discussions

Write discussion on What is net worth create balance sheet
Your posts are moderated
Related Questions
THE NOTES TO THE ACCOUNTS The notes to the accounts provide additional information on the a/c policies that the company has adopted the make-up of some of the items appearing on

Business start up accounting transactions: Jane Whitfield, a sole proprietor, established the JW Flower Shop on January 2, 2010. The following transactions have occurred during

Brushy Mountain Mining Company's ore reserves are being depleted, so its sales are declining. Also, its pit is getting deeper every year, so its costs are rising. As a result, the

Q. What is Depreciation Reserve Fund ? Depreciation Reserve Fund is the fund specially reserved for replacement of assets. Once the assets are purchased from the capital money

what is the different between prorfit and margin prorfi

Types of temporary differences There are two main types of temporary differences; 1) Taxable temporary difference : If the carrying amount is more than the tax base then

Determine balance sheet: Income Statements Year Ended December 31, 20X8   Insure Co. Go-med Co. Sales $3,900,000

You will gain welfare from consuming bread and chocolate. Your welfare is described numerically by W = 4B + 2C, where B denotes the quantity of bread you choose to consume, and C d

how many types of assets and liabilities are there? list of those types required

Q. Average cost of capital? Even though the director suggests that equity finance is appropriate given the amount of finance needed the amount alone doesn't rule out other fina