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
Provide a brief (one typed page) discussion of analysis of the ratios of your company versus the competitor and the industry, addressing your company's liquidity, solvency, profita

A company is considering the purchase of new equipment for $45,000. The projected after-tax net income is $3,000 after deducting $15,000 of depreciation. The machine has a useful l

Occasionally cash flows may have to be discounted more often than once a year semi- monthly, daily, annually or quarterly.  The outcome of this is as fold (i)  The number of per

Clemens Cars' job cost sheet for job A40 shows that the cost to add security features to a car was $10,500. The car was delivered to the customer, who paid $14,900 in cash for the

Question 1 What is accounting and book keeping? Explain the objectives of accounting? Question 2 Explain GAAP and write down the relationship between accounting principles, a

You are evaluating a project which costs $720,000, has a four-year life, and no salvage value. Depreciation is straight-line and the half year rule does not apply. Sales are projec

Most firms build and keep inventories in the course of doing business. Manufacturing firms hold raw material, finished goods and spares and work in process in inventories. Financia

Accounting treatment of deferred tax The objective of accounting for deferred tax is to ensure that the profits for the period d onto fluctuate due to temporary differences. To a

what are the types and objectives of international accounting standersds?

Suppose the interest rate for a one-period bond is 4%. (a) What is the price of an asset paying (1,1,1) which means 1 after 1 period, 1 after 2 periods, and 1 after 3 periods.