Personal Finance (MindTap Course List)
13th Edition
ISBN: 9781337099752
Author: E. Thomas Garman, Raymond Forgue
Publisher: Cengage Learning
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Chapter 6, Problem 1FPC
The Johnsons Attempt to Resolve Their Credit and Cash-Flow Problems Harry and Belinda have a substantial annual joint income— more than $125,000, in fact. Nevertheless, they expect to experience some cash-flow deficits during the months of November and December of the upcoming year (see Tables 3-6 and 3-7 on pages 97–98). To resolve this difficulty, the couple is considering opening a credit card account and using it exclusively for those expenditures that will cause the deficits they face. They could also open a line of credit that would allow them to borrow money by simply going online and having money placed in their checking account.
- What are the advantages and disadvantages of the Johnsons opening these accounts?
- What financial calculations should Harry and Belinda undertake to see whether they could afford to borrow more money at this time?
- What might Harry and Belinda do before applying for credit to ensure that they will pay the lowest interest rate possible?
- Should they use credit to resolve their budget imbalances? Why or why not?
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Felipe and Lucia Ramirez are a newly married couple in their mid-20s. Conrad is a senior at a state university and expects to graduate in the summer of 2015. Lucia graduated last spring with a degree in marketing and recently started working as a sales rep for the Momentum Systems Corporation. She supports both of them on her monthly salary of $4,250 after taxes. The Ramirez’s currently pay all their expenses by cash or check. They would, however, like to use a bank credit card for some of their transactions. Because neither Felipe nor Lucia knows how to apply for a credit card, they approach you for help.
Critical Thinking Questions
Advise the couple on how to fill out a credit application.
Explain to them the procedure that the bank will probably follow in processing their application.
Tell them about credit scoring and how the bank will arrive at a credit decision.
What kind of advice would you offer the Ramirez family on the “correct” use of their card? What would you tell them…
Review the following scenario:
Scenario: Hart Nance and Jason Symington operate gift boutiques in shopping malls. The partners split profits and losses equally, and each takes an annual drawing of $80,000. To even out the workload, Nance travels around the country inspecting their properties. Symington manages the business and serves as the accountant. From time to time, they use small amounts of store merchandise for personal use. In preparing for his daughter's wedding, Symington took inventory that cost $10,000. He recorded the transactions as follows:
Debit
Credit
Cost of Goods Sold
$10,000
Inventory
$10,000
Respond to the following questions and, if appropriate, include personal experience as part of your answers.
How do you feel Symington should have recorded these transactions? Why?
What are the ethical implications of Symington's actions?
Scenario: Hart Nance and Jason Symington operate gift boutiques in shopping malls. The partners split profits and losses equally, and each takes an annual drawing of $80,000. To even out
the workload, Nance travels around the country inspecting their properties. Symington manages the business and serves as the accountant. From time to time, they use small amounts of
store merchandise for personal use. In preparing for his daughter's wedding, Symington took inventory that cost $10,000. He recorded the transactions as follows:
Debit
Credit
Cost of Goods Sold $10,000
Inventory
$10,000
Respond to the following questions and, if appropriate, include personal experience as part of your answers.
• How do you feel Symington should have recorded these transactions? Why?
• What are the ethical implications of Symington's actions?
Chapter 6 Solutions
Personal Finance (MindTap Course List)
Ch. 6.1 - Prob. 1CCCh. 6.1 - Prob. 2CCCh. 6.1 - Prob. 3CCCh. 6.1 - Prob. 4CCCh. 6.2 - Distinguish among the continuous debt method,...Ch. 6.2 - Prob. 2CCCh. 6.2 - Prob. 3CCCh. 6.2 - Prob. 4CCCh. 6.3 - Prob. 1CCCh. 6.3 - Prob. 2CC
Ch. 6.3 - Prob. 3CCCh. 6.3 - Prob. 4CCCh. 6.3 - Prob. 5CCCh. 6.4 - Prob. 1CCCh. 6.4 - Prob. 2CCCh. 6.4 - Prob. 3CCCh. 6.4 - Distinguish between Chapter 7 and Chapter 13...Ch. 6 - Prob. 1DTMCh. 6 - Buying a Vacation Home. Barrie and Inga Adlington,...Ch. 6 - Prob. 3DTMCh. 6 - The Johnsons Attempt to Resolve Their Credit and...Ch. 6 - Victor and Maria Advise Their Niece Victor and...Ch. 6 - Julia Price Thinks About a Loan to Buy an Inboard...Ch. 6 - Prob. 4FPCCh. 6 - Cousins Discuss Their Debt Situations Melinda...Ch. 6 - Prob. 6FPC
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