Question

A cash-flow budget uses the same format as a cash-flow statement. It is prepared on a monthly basis and it reflects budgeted income and expenses.In addition to the cash-flow statement, Deon and May made a list of budget assumptions:

. Deon's income will increase by 5%, effective January 1 . His bonus is generally 10% of his income in the previous year, and he receives it in January. . May's raise will be 3%, effective January 1, Interest and dividend income will conservatively be the same in 2017 as it was in 2016 and will be received on a monthly basis. Mortgage payments will be the same in 2017 as they were in 2016 Federal income taxes are estimated at 20%, state income taxes at 6%, and social security taxes at 7.65% of wages, including Deon bonus. Property insurance and property taxes are paid every six months, in June and December. The amount is expected to be the same in 2017 as it was in 2016. May will contribute $60 per week for the employee portion of their medical insurance. According to her pay schedule, April and June are five-week months. Auto insurance is paid at the end of each calendar quarter and should not be more than it was in 2016. Deon and May would like to purchase a new car in the next few years and will put $500 a month away specifically for that purpose. Deon and May don't expect the amount of variable expenses to change in 2017 except that they would like to double their charitable contributions and go on a vacation to Ireland in June. The vacation will cost $6,000. Gift purchases are made mostly around the holidays, so Deon and May are planning to pay half of the gift expense in December and half in January when the credit card bill comes in Water and sewer is billed quarterly, in January, April, July, and October. The cost of heat should be spread over six months from November to April. All other variable expenses can be spread evenly every month at 2016 amounts.

Answer 1

Annual Budget
Name: Deon and May Daley
Cash-Flow Statement
		2017
	2016	Jan.	Feb.	Mar.	Apr.	May	June	Explanation
Income
Deon's salary	59000	5162.5	5162.5	5162.5	5162.5	5162.5	5162.5	59000/12*1.05
May's salary	53100	4557.75	4557.75	4557.75	4557.75	4557.75	4557.75	53100/12*1.03
Deon's bonus	5000	5900
Interest & Dividends	150	12.5	12.5	12.5	12.5	12.5	12.5	150/12
1.Total Income	117250	15632.75	9732.75	9732.75	9732.75	9732.75	9732.75
Expenditures
Fixed expenses
Mortgage	14976	1248	1248	1248	1248	1248	1248	14976/12
Deon's Federal Income Tax	12800	2212.5	1032.5	1032.5	1032.5	1032.5	1032.5	(sal+Bonus)*20%
Deon's State Income Tax	3840	663.75	309.75	309.75	309.75	309.75	309.75	(sal+Bonus)*6%
Deon's Social Security Taxes	4896	846.28	394.93	394.93	394.93	394.93	394.93	(sal+Bonus)*7.65%
May's Federal Income Tax	10620	911.55	911.55	911.55	911.55	911.55	911.55	Sal.*20%
May's State Income Tax	3186	273.47	273.47	273.47	273.47	273.47	273.47	Sal.6%
May's Social Security Taxes	4062	348.67	348.67	348.67	348.67	348.67	348.67	sal.*7.65%
Property Taxes	4100						4100
Property Insurance	1200						1200
Medical Insurance	2400	240	240	240	300	240	300
Automobile Insurance and Registration	700			175			175	700/4
Savings for auto purchase		500	500	500	500	500	500
2.Total Fixed expenses	62780	7244.21	5258.86	5433.86	5318.86	5258.86	10793.86
Variable expenses
Food	1620	135	135	135	135	135	135	1620/12
Entertainment	3000	250	250	250	250	250	250	3000/12
Dining out	4700	391.67	391.67	391.67	391.67	391.67	391.67	4700/12
Electric	350	29.17	29.17	29.17	29.17	29.17	29.17	350/12
Water and sewer	800	200.00			200.00			800/4
Heat	1250	208.33	208.33	208.33	208.33			1250/6
Cable TV	3000	250.00	250.00	250.00	250.00	250.00	250.00	3000/12
Telephone	600	50.00	50.00	50.00	50.00	50.00	50.00	600/12
Cell phone	900	75.00	75.00	75.00	75.00	75.00	75.00	900/12
Gifts	2000	1000.00						2000/2
Personal care	600	50.00	50.00	50.00	50.00	50.00	50.00	600/12
Medical expenses	3700	308.33	308.33	308.33	308.33	308.33	308.33	3700/12
Vehicle gas and maintenance	2530	210.83	210.83	210.83	210.83	210.83	210.83	2530/12
Charitable contributions	1500	250	250	250	250	250	250	3000/12
Vacation							6000
3.Total Variable expenses	26550	3408.333	2208.33	2208.33	2408.33	2000	8000
4.Total expenses--------(2+3)	89330	10652.55	7467.2	7642.2	7727.2	7258.86	18793.86
5.SURPLUS/(DEFICIT)---   (1-4)	27920	4980.20	2265.55	2090.55	2005.55	2473.89	-9061.11