Creating a Balance Sheet based on the information below: A couple, Timmy and Jen

Question

Creating a Balance Sheet based on the information below:

A couple, Timmy and Jenny have come to see you regarding their financial situation. Timmy works for a consulting firm earning $80,000 per annum (take home pay of $2286.47 per fortnight after tax and other deductions). Jenny is currently a stay home mother taking care of their one-year-old child, which saves them in child care expenses of $450 per week. Before having the baby, Jenny worked as an early childhood teacher earning $45,000 per year ($1401.00 after tax and other deductions). They know that money has been tight and they have only saved $3,000 in a current account.

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Timmy and Jenny have provided the following information to you:  

- The couple are currently renting a house which is costing them $450 per week.

-They have two cell phones each on $40 per month plans

- Power bills estimated to be $150 per month

- Internet and phone plan cost them $70 per month

- They spend about $150 per week on incidental expenses like clothing and entertainment

- Food costs them about $150 per week

- Timmy buses to work with his monthly bus pass costing $120 per month

- The couple also have a car that they have just bought for $15,000 with a 5-year loan at 14.75%. The car comes with costs of $287.75 per year for registration and needs two warrants of fitness per year costing $60 each

- They spend $25 per week on petrol

- The car is now worth $12,000

- In terms of debt, they have $7,000 of personal loan which they pay 151.67 per month.

- They also recently replaced some household appliances and so have hire purchase debt of $4,600 which is costing them $150 per fortnight in repayments for the next 3 years

- Both the personal and hire purchase have interest rates of 22.5%

- The value of their household items, including their hire purchase items is $15,000

- Timmy has accumulated $1750 in his Rabosaver (a type of saving account) fund account.

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Based on the above information, calculate:

1) Timmy and Jenny's Asset, Liability, and Net Worth (Balance Sheet)

Explanation / Answer

Assets Current Account 3000 Car 12000 Hosue Hold 15000 Saving Account 1750 Retained Earning 3745 Total Assets 35495 Liabilities Car Loan $      17,793 Personal Loan 16380 Hire Purchase debt 7821 Total Liabilities $      41,994 Networth (Assets - Liabilities) $       -6,499 Earnings: Timmy take hom earning (2286.47/14x365) 59612 Expense: Less: Rent (450 x 52) 23400 Less: Cell Phone (40 x2 x12) 960 Less: Power Bill (150 x 12) 1800 Less: Internet and Phone (70 x 12) 840 Less: Incidental( 150 x 52) 7800 Less: Food Cost ( 150 x 52) 7800 Less: Bus Pass (120 x12) 1440 Less: Ineterest on Car loan ( see working below) 4448 Less: Car registration 288 Less: Warrants 60 Less: Petrol (25 x 52) 1300 Less: Interest on Personal Loan (151.67 x 12) 1820 Less: Hire purchase( 150 /14 x 365) 3911 55867 Retained Earning 3745 Computation of EMI per Annum for Car Loan Amount of Loan 15000 Term 5 years Rate 14.75% EMI per annum $                 4,448 Total Liability for 5 years (EMI per annum x 5) $               22,241 Current year liability (22241-4448) $               17,793 Computation of Personal Loan Liability Amount of Loan 7000 Rate 22.50% EMI 151.67 Term 10 years Total Liability for 10 years (151.67 x 12 x 10) 18200 Current year liability (18200- (151.67 x 12) 16380 Computation of Hire Purchase Liability Debt 4600 Payment Fortnight 150 Term 3 years Total Liability for 3 years (150/14*(365x3) 11732 Current year liability (11732- 3911) 7821

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