Question: Ronna and Sherman Terrel are creating a budget for 2003. Ronna is a systems analyst with an airplane producer, & Sherman is working on a master's degree in educational psychology. The Terrels do not have any children or other dependents. Ronna estimates her salary will be about $39,996 in 2003; Sherman expects to work only during the summer months, doing painting & remodeling work for a building contractor. He anticipates an income from those activities of $3000 a month in June, July, & August. Sherman does have a scholarship that pays his tuition and also provides dollar 3,600 a year of which dollar 2400 is payable in February and $1200 is payable in October. The Terrels don't expect to have any other income in 2003.
Ronna & Sherman have listed their expected total expenses in 2003 as follows:
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Housing (rent)
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$6,600
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Transportation
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5100
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Food (includes dining out)
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8100
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Utilities
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3000
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Payroll taxes:
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|
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Donna
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12,000
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Sherman
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1500
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Insurance:
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|
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Life - payable in May
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720
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Auto - payable in January
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1,500
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Leisure and entertainment:
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|
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Vacation in May
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1,200
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All others
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1,800
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Clothing
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1,500
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Others
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$3,900
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Total Expenses
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$46,920
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The Terrels will begin 2003 with about $1,000 in liquid assets, & they prefer not to draw this balance below dollar 600 at any time during the year.
[A] Create a monthly income and expense plan for the Terrels in 2003.
[B] On the basis of the plan you have just prepared, Argue the Terrels expected financial situation in 2003. Describe if you foresee any difficulties.
[C] During the quarter break in April, Sherman's employer landed a major remodeling project and asked for Sherman's help. Sherman agreed, and he expects to earn dollar 1,500 from the job before taxes but probably won't accept a check until early June. Discuss how this unexpected event might change the Terrels' activities & their budget for the balance of 2003. It is not necessary to create a revised monthly income and expense plan but do refer to specific accounts & amounts [make appropriate assumptions] in your discussion.