Preparation of monthly income and expense plan and analysis of financial position

Donna and Sherman Terrel are preparing a budget for 2003. Donna is a systems analyst with an airplane manufacturer, and Sherman is working on a master's degree in educational psychology. The Terrels do not have any children or other dependents. Donna estimates her salary will be about $39,996 in 2003; Sherman expects to work only during the summer months, doing painting and remodeling work for a building contractor. He anticipates an income from those activities of $3000 a month in June, July, and August. Sherman does have a scholarship that pays his tuition and also provides $3,600 a year of which $2400 is payable in February and $1200 is payable in October. The Terrels don't expect to have any other income in 2003.

Donna and Sherman have listed their expected total expenses in 2003 as follows:

The Terrels will begin 2003 with about $1,000 in liquid assets, and they prefer not to draw this balance below $600 at any time during the year.

1. Prepare a monthly income and expense plan for the Terrels in 2003.

2. On the basis of the plan you have just prepared, discuss the Terrels expected financial situation in 2003. Explain if you foresee any difficulties.

3. 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 $1,500 from the job before taxes but probably won't receive a check until early June. Discuss how this unexpected event might affect the Terrels' activities and their budget for the balance of 2003. It is not necessary to prepare a revised monthly income and expense plan but do refer to specific accounts and amounts (make appropriate assumptions) in your discussion.