Question

7. Preparing a cash budget Dan and June started to create a budget (based on last year’s income and expense statement) but got stuck. They know that you have learned how to create budgets and are asking for your help. They would like you to input the correct values for the first three months of next year. Income and Expense Statement Name(s): Dan and June Kuryaki For the year ending: As of December 31 Dollars Income Wages and salaries Name: Dan Kuryaki $ 20,000 Name: June Kuryaki 18,000 Bonuses and commissions Dan’s bonus 2,000 (1) Total Income: $40,000 Expenses Housing $6,756 Utilities Dallas Power & Light 756 U.S. Cellular 372 Food Groceries 1,356 Transportation Auto loan 4,320 Public transportation 3,000 Insurance 1,126 Taxes 9,500 Fun money Cruise to Mexico 3,000 Parents’ loan 875 (2) Total Expenses: $31,061 Surplus (Deficit): $8,939 In addition to the statement, you will need to know the following information: • They estimated their net annual income (after taxes and employer deductions) at $15,000 for Dan and $13,500 for June • Insurance is paid at the end of each calendar quarter • June purchases her commuter pass on the first of each month • The parents’ loan is money they borrowed from June’s parents to pay off their student loans. How much they pay each month is determined by them • The fun money listed on the statement is the money spent for a cruise to Mexico. They didn’t keep track of any other entertainment expenses (such as dinners out and movies) incurred during the year. Note: Enter a value in each blank cell to get full credit for this exercise, and round all dollar amounts to the nearest whole dollar. Three-Month Cash Budget (By Month) Name(s): Dan and June Kuryaki For: Three months Ending: March 31 January February March Total for Three Months Income Dan’s salary June’s salary Total income Expenses Rent Utilities: Dallas Power & Light U.S. Cellular Food Automobile Public transportation Insurance Parents’ loan Fun money Total expenses Cash surplus (deficit) Cumulative surplus (deficit) Looking at the completed budget, what single item would you recommend that they add to their budget? Dividend and interest income Pensions and annuities Savings and investments This is because: The couple needs to increase their distributions from their retirement plans. The couple needs to budget for contingencies and save for future goals. The couple needs to increase their taxable income.

Answer 1

Solution: The Completed Budget working is as follows:-

Three-Month Cash Budget (By Month)
Name(s): Dan and June Kuryaki
For: Three months		Ending: March 31
	January	February	March	Total for Three Months
Income
Dan’s salary	1125	1125	1125	3375
June’s salary	1250	1250	1250	3750
Total income	2375	2375	2375	7125
Expenses
Rent	563	563	563	1689
Utilities:
Dallas Power & Light	63	63	63	189
U.S. Cellular	31	31	31	93
Food	113	113	113	339
Automobile	360	360	360	1080
Public transportation	250	250	250	750
Insurance	0	0	281.5	281.5
Parents’ loan	73	73	73	219
Fun money	250	250	250	750
Total expenses	1703	1703	1984.5	5390.5
Cash surplus (deficit)	672	672	390.5	1734.5
Cumulative surplus (deficit)	1734.5

We would recommend the couple to add Savings and Investment in their Budget as the couple needs to budget for contingencies and save for future goals.