Terry and Breanna Joyce Case Study - Accounting and Finance Assignment Help

Assignment Task:

Terry and Breanna Joyce have been happily married for five years.  They have decided it is time to seek financial advice due to further consideration of their goals and objectives and some significant changes to their financial situation.

They own their home at 22 West Side Street, Sydney, NSW 2000, which is currently mortgaged.  Further details may be found in the pre-populated fact find.

Terry works as an Architect earning $140,000 per annum plus Super Guarantee (SG) contribution.  Breanna works as a software developer earning $150,000 plus SG.

They have come to you as they have just found out that Breanna is pregnant with twins and is due on New Year's Day, providing there are no complications.  Breanna wants to take two years off work and has some leave entitlements owing to her.  She has 8 weeks in annual leave and will be eligible for 18 weeks in maternity leave.  Breanna's boss has indicated that she can take this leave at half pay if she wishes.  Breanna has indicated that she doesn't know if she should take her employer up on this offer.  She expects to work until the end of the year.

You have had a comprehensive meeting with them and have completed relevant sections of the fact find the document (provided). The budget discussion you had with them reveals they are saving approximately $48,000 per annum.
 
Breanna has an investment property, which she purchased before she met Terry.  When they got married she rented it out and it remains in her name.  She thinks the rental income covers its costs.  She wanted to hold on to the property but is open to selling it if there are better options for them.

They only have their work superannuation funds to which all superannuation contributions are paid.  Additional information is found in the pre-populated fact find.
You will find more comprehensive information about their assets, liabilities and other important items in the pre-populated fact find. They have each completed a risk profile with you that included a detailed discussion about their individual risk profiles, as well as their joint risk profile.  This information is found in the pre-populated fact find.

Primary goals:

1. Terry and Breanna would like to make plans for their new family, particularly allowing Breanna to take extended maternity leave from work.
2. They feel the university is really important and they would like to make sure that they have enough savings to put their children through university.  They estimate they will need $90,000, which they want in full when their children turn 19.
3. They have a credit card which has an average balance of $3000.  They make the minimum payment each month, but its balance remains the same.
4. They have a mortgage on their home and a mortgage on their investment property and are wondering if they should work toward paying these off over the next six months.

Assessment Questions:

Question 1:

i. Terry and Breanna's principal place of residence is in Terry's name.  The interest rate on the loan is 3.5% and it is variable.  The original term for borrowing was 30 years, which was five years ago. Calculate the monthly mortgage repayments on their new property and provide amortisation tables.
 
ii. Once Breanna returns to work in two years time they think they might put extra repayments into the home loan.  If they add an extra $500 per month, when would the final payment be made?

Question 2:

i. Calculate the payments into a savings plan that will provide them with their goal of $90,000 when the twins turn 19 years of age.
 
ii. Justify your choice of investment vehicle.

Question 3:

i. Construct a cash flow statement for Joyce's for the 2018/19 tax year.  Include mortgage repayments.

ii. Create a household balance sheet for Terry and Breanna, comment on whether they have a negative or positive net worth.

iii. Using the information given, calculate the following ratios and provide comment upon your answers:

a. savings ratio
b. liquidity ratio
c. solvency ratio
d. Monthly debt service ratio

Please provide formulas and calculations AND make a brief analysis regarding these answers.  These formulas are found in Taylor and Juchau, ensure these are referenced clearly in the body of your assessment.

Question 4:

Calculate the new tax position for the household for the 2019/20 tax year. Using the information provided, calculate the taxable income and tax payable for both.  What tax planning advice can you offer the couple?

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