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Teaching Since:	May 2017
Last Sign in:	398 Weeks Ago, 2 Days Ago
Questions Answered:	66690
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011

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Professor
Phoniex University
Oct-2001 - Nov-2016

Category > Management Posted 29 Sep 2017 My Price 10.00

Victor and Maria Hernandez

Victor and Maria Hernandez

Victor and Maria, both in their late 30s, have two children: John, age 13 and Joseph, age 15. Victor has had a long sales career with a major retail appliance store. Maria works part time as a dental hygienist. The Hernandezes own two vehicles and their home, on which they have a mortgage. They will face many financial challenges over the next 20 years, as their children drive, go to college, and leave home and go out in the world on their own. Victor and Maria also recognize the need to further prepare for their retirement and the challenges of aging.

Victor and Maria Hernandez Think About Their Financial Statements and Budgets

Victor and Maria Hernandez spent some time making up their first balance sheet, which is shown in Table.

Balance Sheet for a Couple with Two Children—Victor and Maria Hernandez, January 1, 2008

	Dollars	Percent
ASSETS
Monetary Assets
Cash on hand	260	0.08
Savings account	1500	0.48
Victor’s checking account	600	0.19
Maria’s checking account	700	0.23
Tax refund due	700	0.23
Rent receivable	660	0.21
Total monetary assets	4420	1.43
Tangible Assets
Home	176000	56.79
Personal property	9000	2.9
Automobiles	11500	3.71
Total tangible assets	196500	63.4
Investment Assets
Fidelity mutual funds	4500	1.45
Scudder mutual fund	5000	1.61
General Motors stock	2800	0.9
New York 2016 bonds	1000	0.32
Life insurance cash value	5400	1.74
IRA	6300	2.03
Real estate investment	84000	27.1
Total investment assets	109000	35.17
Total Assets	309920	100
LIABILITIES
Short-Term Liabilities
Dentist bill	120	0.04
Credit card debt	1545	0.5
Total short-term liabilities	1665	0.54
Long-Term Liabilities
Sales finance company: automobile	7700	2.48
Savings and loan: real estate	92000	29.69
Total long-term liabilities	99700	32.17
Total Liabilities	101365	32.71
Net Worth	208555	67.29
Total Liabilities and Net Worth	309920	100

(a) Victor and Maria are a bit confused about how various financial activities can affect their net worth. Assume that their home is now appraised at $192,000 and the value of their automobile has dropped to $9500. Calculate and characterize the effects of these changes on their net worth.

(b) If Victor and Maria take out a bank loan for $1545 and pay off their credit card debts totaling $1545, what effects would these changes have on their net worth?

(c) If Victor and Maria sell their New York 2016 bond and put the cash into their savings account, what effects would this move have on their net worth ratio?

(d) Use the sample budgets in Table to explain to the couple how their budget might change when their children go to college.

Sample Monthly Budgets for Various Family Units

			Young	Married Couple	Married Couple
	College	Single Working	Married	with Two Young	with Two College-
Classifications	Student	Person	Couple	Children	Age Children
INCOME
Salary	300	$2800	$2200	$3500	$4400
Salary	0	0	2100	860	1600
Interest and dividends	5	15	15	15	80
Loans/scholarships	300	0	0	0	0
Savings withdrawals	570	0	0	0	500
Total Income	1175	$2815	$4315	$4375	$6580
EXPENSES
Fixed Expenses
Retirement contributions	0	$ 20	$ 360	$ 180	$ 340
IRA	0	20	160	180	200
Savings (withheld)	0	20	20	10	100
Housing	350	750	900	1100	1300
Health insurance	0	0	60	150	140
Life and disability	0	0	20	60	40
insurance
Homeowner’s or renter’s insurance	0	0	0	60	80
Automobile insurance	0	80	80	60	140
Automobile payments	0	280	280	220	0
Loan 1 (TV and stereo)	0	80	80	40	0
Loan 2 (other)	0	40	40	0	50
Federal and state taxes	30	455	455	600	710
Social Security taxes	23	210	210	305	385
Real estate taxes	0	0	0	0	40
Investments	0	0	0	100	300
Total Fixed Expenses	$ 403	$1955	$1955	$3065	$3825
Variable Expenses
Other savings	$ 0	$ 60	$ 150	$ 0	$ 0
Food	180	230	270	340	350
Utilities	40	80	90	140	145
Automobile gas, oil, maintenance	0	90	110	90	100
Medical	10	30	40	70	50
Child care	0	0	0	260	0
Clothing	20	50	60	50	40
Gifts and contributions	10	20	40	60	80
Allowances	20	75	60	100	180
Education	400	0	0	0	1500
Furnishing and appliances	10	10	30	20	20
Personal care	10	45	25	30	30
Entertainment	40	120	100	60	120
Vacations	17	30	40	30	60
Miscellaneous	15	20	80	60	80
Total variable expenses	$ 772	$ 860	$1095	$1310	$2755
Total Expenses	$1175	$2815	$4315	$4375	$6580

Answers

Maurice Tutor

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Status NEW Posted 29 Sep 2017 10:09 PM My Price 10.00

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