A Personal Statement of Financial Condition Dated December 31,2008,is to Be

question 5

Essay

A personal statement of financial condition dated December 31,2008,is to be prepared for Wilhelm Holz.He provides the following information for your use in preparing the statements.All amounts are as of December 31,2008.
1)Cash on hand and in bank is $4,000.
2)Investments costing $30,000 have a market value of $78,000.
3)His personal residence cost $150,000 ten years ago,and is currently worth $320,000.
4)The payoff balance of his home mortgage is $80,000.
5)The fair value of his 401(k)retirement account is $700,000.All withdrawals from the account will be fully taxable.
6)Amounts due on credit card debt total $5,000.
7)Estimated income taxes on his calendar 2008 earnings amount to $15,000.Taxes withheld in 2008 were $14,000.
8)Assume an income tax rate of 30 percent.

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Definitions:

Treasury Bills

Short-term government securities issued at a discount from the par value and pay no interest, maturing in a year or less.

Portfolio

A collection of investments held by an individual or institution, which may include stocks, bonds, real estate, and other financial assets.

Indifference Curves

Graphical representations in economics showing different bundles of goods between which a consumer is indifferent, reflecting preferences of equal utility.

Budget Line

A graphical representation of all possible combinations of two goods that an individual can afford to purchase with a given budget, at given prices.