PERSONAL FINANCE – FINA200
Fall 2015, Section W
Case 1 – due Thursday, November 5, 2015 5:00pm
Covering Chapters 1 – 6 (excluding Chapter 4)
___________________________________________________________
PLEASE NOTE
• THIS ASSIGNMENT IS TO BE COMPLETED BY YOU ALONE.

• YOUR SOLUTION MAY BE SUBMITTED IN ENGLISH OR FRENCH.

• ACCEPTABLE SUBMISSION FORMATS INCLUDE WORD or PDF. EXCEL IS NOT ACCEPTED.

• OUTSIDE RESEARCH WILL LIKELY BE REQUIRED. PLEASE QUOTE ALL SOURCES AND DO NOT COPY AND PASTE!
____________________________________________________________
Student Name: ______________________________________
ID number: _________________________________________

For TA’s only:
Student mark
Question 1 /20
Question 2 /20
Question 3 /1
Question 4 /3
Question 5 /5
Question 6 /2
Question 7 /4
Question 8 /2
Question 9 /2
Question 10 /2
Question 11 /16
Question 12 /20
Question 13 /3
Total /100

It is October 31, 2015 and Chris Smith reflects on the past two years. He is proud of himself that in September 2014 he went back to school and is now in his first year at Concordia. The student loan of $2,000 most certainly helped especially as the interest on the loan was only at 2% with the loan principal repayment only starting 6 months after he graduates or leaves school. He just finished taking the course FINA 200 and he realizes that it was the best course ever as he can see that he needs to organize his personal finances.
On January 1, 2014, he turned 19 and moved back home to live with his parents instead of with his good friend, John as money was just too tight. He still lives in downtown Montreal but now his expenses are much lower than in 2013 as his parents only charge him $100/month in rent and $75/month for food (his cellphone is more expensive at $200/month!). He made $19,000 working at a few odd jobs, for which withholdings of $1,000 in Federal income taxes and $1,100 in Quebec taxes were deducted by his employers. He made about the same income as the previous year. His friend John also confirmed that he did not need to file his 2014 nor his 2013 tax return and that if he did, because he was late in filing, he would be hit with penalties, even if he did not owe anything. Chris figured that John was right and was even more convinced that he did not owe anything as he had made a Registered Retirement Savings Plan (RRSP) contribution of $1,275 and had heard that making such contributions always resulted in a refund. Even if he did owe or have penalties, he didn’t have the money for it anyway.
Chris is living on a fixed income with little wiggle room especially with his tuition of $2,000 (registered full-time – 4 months). He never really looked at his pay statements from his employers, but since his Personal Finance course, he is more aware about his finances and now realizes that in addition to the above Federal and provincial taxes withheld, his employers also withheld Quebec Pension Plan (QPP) contributions of $500, Employment Insurance (EI) premiums of $70, Quebec Parental Insurance Plan (QPIP) premiums of $50, union dues of $25 and a drug and medical plan premiums of $50! No wonder he always felt cash poor, even after just receiving a paycheque! (All amounts are annualized, unless specified).
Chris wants to get a car loan and wanted to be prepared for the meeting with the bank. He felt especially insecure as he knew that his credit card situation was not in the best shape. It was one year ago (shortly after starting at Concordia in the fall semester of 2014), that MasterCard approached him and just “gave” him a credit card. It was too easy! Chris immediately took a cash advance off the card for $3,000, the exact same amount that he negotiated John to sell him his sound system. John agreed to the price even though he had paid $4,000 for it 6 months previously (John even had the receipt to prove it). After the first month, Chris knew he was in trouble and couldn’t repay, not even the minimum amount that MasterCard was requesting. Chris felt that the credit card company knew that he was a student with student loans and that it was their stupidity for giving him the card in the first place, so he ignored their repeated emails for payments. He also did not realize that cash advances are charged as of the date of the advance and are not given a 30 day grace period like other purchases on credit cards!
To prepare for the meeting with the bank for the car loan, Chris decided to prepare a personal balance sheet and a cash flow statement as at December 31, 2014. He knew it wouldn’t be pretty but thought that if he was upfront with the bank and showed them his goals in how he was going to take control of his personal finances, that they may take that into consideration in their car loan assessment.
Chris sat down and thought about everything he owned: he remembered that his grandmother gave him a family wedding ring to eventually give to his future bride. She had it recently evaluated by a jeweler at $2,000. As he did not have a fiancée, not even a girlfriend for that matter, he wasn’t sure if he could consider this as “his” and if he could put that down. When he was younger, his parents purchased shares in his name with all the money that was given for his birthdays. He never thought about these shares until now and didn’t think anything of it until he decided to look them up and saw that they were shares in Google. They were worth about $5,000US and with an exchange rate of 1.35%, they were worth quite a bit. The reason why Chris did not remember or bother about these shares is that he never remembered receiving any dividends on these shares and was not sure if he should put an amount in his cash flow statement for these or in his personal balance sheet. He was now confused as to what went where…
At the beginning of June 2014, Chris had wanted to start a business and needed $2,500. His favourite uncle lent him the money. Chris had great respect for his uncle and had promised that he would pay it back some day with interest of 5%. He knew that his uncle did not expect him to repay but Chris was adamant that he needed to honour this debt. Chris had not yet decided what kind of business to invest in and within a few months, spent the money on stuff that he can’t even account for.
Chris knew that once school started, family would give him money as a present and he always counted on this. However as he was now 20, he did not know if he was going to receive the $1,000 that he always received as a “kid”. He is pretty sure that his aunts and uncles would eventually give him the money as he really could use it this year, as he only had $10 in his bank account. He also wanted to reflect this in his net worth statement.
Chris was putting the statements together for himself and for the bank. He really wanted the bank loan for a used car. He his current car was a “piece of junk”. He had bought it on his 16th birthday with money he had accumulated over the years. It cost him $2,000 back then but he was told that he could receive $100 for scrap metal parts, if the car could make it to the junkyard.
As his car was not reliable, he also purchased a Montreal metro pass, his CAM pass cost him $79.50/month. He wanted to claim this on his tax return. John told him that he could and that he would get this fully back in a refund. Chris valued John’s opinion and more importantly, he could really use the $954 but he wasn’t quite sure that what John was saying was correct.
At Thanksgiving last year, Chris injured himself playing hockey which resulted in special medication costing $100. It was not covered by the government medical system, Régie de l’Assurance Maladie du Québec (RAMQ). He also needed physiotherapy for 4 weeks at $70 per week, which was also not covered.
Chris figured that he could use some quick money and thought it best to play the lottery. For the past year, he has been putting $2 in every day with no winnings to date. He now wants to deduct this loss on his tax return as John said he did this on his own personal tax returns.
Table A
Federal and Provincial Income Tax Rates and Brackets for 2014
Tax Tax
Rates Brackets/Taxable Income
Federal 15.00% Up to $43,953
22.00 43,954–87,907
26.00 87,908–136,270
29.00 136,271 and over

Quebec 16.00% Up to $41,495
20.00 41,496–82,985
24.00 82,986–100,970
25.75 100,971 and over

Question 1: (20 marks)
Use the following template to determine Chris’ Federal non-refundable tax credits for 2014. Visit the CRA website for further information (also refer to Exhibit 3-6b in your online textbook).

Line Name Calculation $ Amount
300 Basic personal amount
303 Amount for an Eligible Dependent
367 Amount for Children
308 CPP or QPP contributions
312 Employment Insurance premiums
375 QPIP
363 Canada Employment Amount
364 Public Transit Amount
369 Home Buyers’ Amount
319 Interest on Student Loans
323 Tuition, Education and Textbook
332 Medical Expenses
335 Sub-total of Amounts
338 Non-Refundable Credits (excl. Donations and Dividend Tax Credit)
349 Donations and Gifts
350 Federal Non-Refundable Tax Credits (Schedule 1)

Question 2: (20 marks)
Using this template, calculate Chris’ 2014 Federal tax position on whether he is entitled to a refund or owes an amount to Canada Revenue Agency (CRA):
150 Total Income
Deductions
260 Taxable Income
Federal Tax on Taxable Income Calculation (Schedule 1 – use Table A)
350 Federal Non-Refundable Tax Credits (Schedule 1)
420 Net Federal Tax
437 Total Income Tax Deducted
440 Refundable Quebec Abatement
484 Refund
485 Balance Owing
Question 3: (1 mark)
Is it too late for Chris to file a 2014 Federal personal income tax return? Yes or No.

Question 4: (3 mark)
What is the penalty and interest for late filing a Federal personal income tax return? Would this apply to Chris if he filed his 2014 personal income tax return?

Question 5: (5 marks)
List five advantages for Chris to file his 2014 Federal personal income tax return.

Question 6: (2 marks)
When Chris received his MasterCard on November 1, 2014, he immediately took a cash advance of $3,000 and purchased the sound system off of his good buddy, John. Chris knew from his financial planning course that a cash advance was a bad idea as it triggered interest from day 1 (with no 30 day grace period). What amount of interest has been accumulated on the card to October 31, 2015, if the annual interest is 28%, compounded daily?

Question 7: (4 marks)
Chris also heard of the Tax Free Savings Account (TFSA)and wanted to know what the maximum amount would be that he could contribute in 2015 including prior years (in case he ever came into some money or got a better paying job!).
Question 8: (2 marks)
Chris buys lottery tickets each day with hopes of winning, costing $2/day. If he instead invested this money, after forty-five years, at 6% interest, how much could he have saved instead of purchasing lottery tickets?
Question 9: (2 marks)
Can Chris take a business loss for the $2,500 that his uncle lent him? Explain and if so, on what line in the Federal tax return.

Question 10: (2 marks)
Chris’ grandmother is moving into a nursing home. She wants to get rid of all her furniture and paperwork even her tax returns. We are currently October 2015 – how many years of tax returns should she keep and for which years?

Question 11: (16 marks)
Please show all calculations for full marks.
Prepare Chris’ 2014 Personal Balance Sheet (refer to Exhibit 2-3 in your online textbook).

Chris Smith
Personal Balance Sheet as of December 31, 2014

Assets $ Amount
Liquid Assets

Real Estate

Personal Possessions

Investment Assets

Total Assets
Liabilities
Current Liabilities

Long-Term Liabilities

Total Liabilities
Net Worth
Question 12: (20 marks)
Calculate Chris’ 2014 cash flow for him to present to the bank for his car loan.
Chris Smith
Cash Flow Statement for the Year Ended December 31, 2014

CASH INFLOW $ Amount
Income

Deductions At Source

TOTAL INFLOWS

CASH OUTFLOWS
Fixed Expenses

Total Fixed Expenses

Variable Expenses

Total Variable Expenses

TOTAL OUTFLOWS
NET SURPLUS/(DEFICIT)
Question 13: (3 marks)
Give 3 goals that Chris should consider for better managing his personal finances.

PERSONAL FINANCE – FINA200
Fall 2015, Section W
Case 1 – due Thursday, November 5, 2015 5:00pm
Covering Chapters 1 – 6 (excluding Chapter 4)
___________________________________________________________
PLEASE NOTE
• THIS ASSIGNMENT IS TO BE COMPLETED BY YOU ALONE.

• YOUR SOLUTION MAY BE SUBMITTED IN ENGLISH OR FRENCH.

• ACCEPTABLE SUBMISSION FORMATS INCLUDE WORD or PDF. EXCEL IS NOT ACCEPTED.

• OUTSIDE RESEARCH WILL LIKELY BE REQUIRED. PLEASE QUOTE ALL SOURCES AND DO NOT COPY AND PASTE!
____________________________________________________________
Student Name: ______________________________________
ID number: _________________________________________

For TA’s only:
Student mark
Question 1 /20
Question 2 /20
Question 3 /1
Question 4 /3
Question 5 /5
Question 6 /2
Question 7 /4
Question 8 /2
Question 9 /2
Question 10 /2
Question 11 /16
Question 12 /20
Question 13 /3
Total /100

It is October 31, 2015 and Chris Smith reflects on the past two years. He is proud of himself that in September 2014 he went back to school and is now in his first year at Concordia. The student loan of $2,000 most certainly helped especially as the interest on the loan was only at 2% with the loan principal repayment only starting 6 months after he graduates or leaves school. He just finished taking the course FINA 200 and he realizes that it was the best course ever as he can see that he needs to organize his personal finances.
On January 1, 2014, he turned 19 and moved back home to live with his parents instead of with his good friend, John as money was just too tight. He still lives in downtown Montreal but now his expenses are much lower than in 2013 as his parents only charge him $100/month in rent and $75/month for food (his cellphone is more expensive at $200/month!). He made $19,000 working at a few odd jobs, for which withholdings of $1,000 in Federal income taxes and $1,100 in Quebec taxes were deducted by his employers. He made about the same income as the previous year. His friend John also confirmed that he did not need to file his 2014 nor his 2013 tax return and that if he did, because he was late in filing, he would be hit with penalties, even if he did not owe anything. Chris figured that John was right and was even more convinced that he did not owe anything as he had made a Registered Retirement Savings Plan (RRSP) contribution of $1,275 and had heard that making such contributions always resulted in a refund. Even if he did owe or have penalties, he didn’t have the money for it anyway.
Chris is living on a fixed income with little wiggle room especially with his tuition of $2,000 (registered full-time – 4 months). He never really looked at his pay statements from his employers, but since his Personal Finance course, he is more aware about his finances and now realizes that in addition to the above Federal and provincial taxes withheld, his employers also withheld Quebec Pension Plan (QPP) contributions of $500, Employment Insurance (EI) premiums of $70, Quebec Parental Insurance Plan (QPIP) premiums of $50, union dues of $25 and a drug and medical plan premiums of $50! No wonder he always felt cash poor, even after just receiving a paycheque! (All amounts are annualized, unless specified).
Chris wants to get a car loan and wanted to be prepared for the meeting with the bank. He felt especially insecure as he knew that his credit card situation was not in the best shape. It was one year ago (shortly after starting at Concordia in the fall semester of 2014), that MasterCard approached him and just “gave” him a credit card. It was too easy! Chris immediately took a cash advance off the card for $3,000, the exact same amount that he negotiated John to sell him his sound system. John agreed to the price even though he had paid $4,000 for it 6 months previously (John even had the receipt to prove it). After the first month, Chris knew he was in trouble and couldn’t repay, not even the minimum amount that MasterCard was requesting. Chris felt that the credit card company knew that he was a student with student loans and that it was their stupidity for giving him the card in the first place, so he ignored their repeated emails for payments. He also did not realize that cash advances are charged as of the date of the advance and are not given a 30 day grace period like other purchases on credit cards!
To prepare for the meeting with the bank for the car loan, Chris decided to prepare a personal balance sheet and a cash flow statement as at December 31, 2014. He knew it wouldn’t be pretty but thought that if he was upfront with the bank and showed them his goals in how he was going to take control of his personal finances, that they may take that into consideration in their car loan assessment.
Chris sat down and thought about everything he owned: he remembered that his grandmother gave him a family wedding ring to eventually give to his future bride. She had it recently evaluated by a jeweler at $2,000. As he did not have a fiancée, not even a girlfriend for that matter, he wasn’t sure if he could consider this as “his” and if he could put that down. When he was younger, his parents purchased shares in his name with all the money that was given for his birthdays. He never thought about these shares until now and didn’t think anything of it until he decided to look them up and saw that they were shares in Google. They were worth about $5,000US and with an exchange rate of 1.35%, they were worth quite a bit. The reason why Chris did not remember or bother about these shares is that he never remembered receiving any dividends on these shares and was not sure if he should put an amount in his cash flow statement for these or in his personal balance sheet. He was now confused as to what went where…
At the beginning of June 2014, Chris had wanted to start a business and needed $2,500. His favourite uncle lent him the money. Chris had great respect for his uncle and had promised that he would pay it back some day with interest of 5%. He knew that his uncle did not expect him to repay but Chris was adamant that he needed to honour this debt. Chris had not yet decided what kind of business to invest in and within a few months, spent the money on stuff that he can’t even account for.
Chris knew that once school started, family would give him money as a present and he always counted on this. However as he was now 20, he did not know if he was going to receive the $1,000 that he always received as a “kid”. He is pretty sure that his aunts and uncles would eventually give him the money as he really could use it this year, as he only had $10 in his bank account. He also wanted to reflect this in his net worth statement.
Chris was putting the statements together for himself and for the bank. He really wanted the bank loan for a used car. He his current car was a “piece of junk”. He had bought it on his 16th birthday with money he had accumulated over the years. It cost him $2,000 back then but he was told that he could receive $100 for scrap metal parts, if the car could make it to the junkyard.
As his car was not reliable, he also purchased a Montreal metro pass, his CAM pass cost him $79.50/month. He wanted to claim this on his tax return. John told him that he could and that he would get this fully back in a refund. Chris valued John’s opinion and more importantly, he could really use the $954 but he wasn’t quite sure that what John was saying was correct.
At Thanksgiving last year, Chris injured himself playing hockey which resulted in special medication costing $100. It was not covered by the government medical system, Régie de l’Assurance Maladie du Québec (RAMQ). He also needed physiotherapy for 4 weeks at $70 per week, which was also not covered.
Chris figured that he could use some quick money and thought it best to play the lottery. For the past year, he has been putting $2 in every day with no winnings to date. He now wants to deduct this loss on his tax return as John said he did this on his own personal tax returns.
Table A
Federal and Provincial Income Tax Rates and Brackets for 2014
Tax Tax
Rates Brackets/Taxable Income
Federal 15.00% Up to $43,953
22.00 43,954–87,907
26.00 87,908–136,270
29.00 136,271 and over

Quebec 16.00% Up to $41,495
20.00 41,496–82,985
24.00 82,986–100,970
25.75 100,971 and over

Question 1: (20 marks)
Use the following template to determine Chris’ Federal non-refundable tax credits for 2014. Visit the CRA website for further information (also refer to Exhibit 3-6b in your online textbook).

Line Name Calculation $ Amount
300 Basic personal amount
303 Amount for an Eligible Dependent
367 Amount for Children
308 CPP or QPP contributions
312 Employment Insurance premiums
375 QPIP
363 Canada Employment Amount
364 Public Transit Amount
369 Home Buyers’ Amount
319 Interest on Student Loans
323 Tuition, Education and Textbook
332 Medical Expenses
335 Sub-total of Amounts
338 Non-Refundable Credits (excl. Donations and Dividend Tax Credit)
349 Donations and Gifts
350 Federal Non-Refundable Tax Credits (Schedule 1)

Question 2: (20 marks)
Using this template, calculate Chris’ 2014 Federal tax position on whether he is entitled to a refund or owes an amount to Canada Revenue Agency (CRA):
150 Total Income
Deductions
260 Taxable Income
Federal Tax on Taxable Income Calculation (Schedule 1 – use Table A)
350 Federal Non-Refundable Tax Credits (Schedule 1)
420 Net Federal Tax
437 Total Income Tax Deducted
440 Refundable Quebec Abatement
484 Refund
485 Balance Owing
Question 3: (1 mark)
Is it too late for Chris to file a 2014 Federal personal income tax return? Yes or No.

Question 4: (3 mark)
What is the penalty and interest for late filing a Federal personal income tax return? Would this apply to Chris if he filed his 2014 personal income tax return?

Question 5: (5 marks)
List five advantages for Chris to file his 2014 Federal personal income tax return.

Question 6: (2 marks)
When Chris received his MasterCard on November 1, 2014, he immediately took a cash advance of $3,000 and purchased the sound system off of his good buddy, John. Chris knew from his financial planning course that a cash advance was a bad idea as it triggered interest from day 1 (with no 30 day grace period). What amount of interest has been accumulated on the card to October 31, 2015, if the annual interest is 28%, compounded daily?

Question 7: (4 marks)
Chris also heard of the Tax Free Savings Account (TFSA)and wanted to know what the maximum amount would be that he could contribute in 2015 including prior years (in case he ever came into some money or got a better paying job!).
Question 8: (2 marks)
Chris buys lottery tickets each day with hopes of winning, costing $2/day. If he instead invested this money, after forty-five years, at 6% interest, how much could he have saved instead of purchasing lottery tickets?
Question 9: (2 marks)
Can Chris take a business loss for the $2,500 that his uncle lent him? Explain and if so, on what line in the Federal tax return.

Question 10: (2 marks)
Chris’ grandmother is moving into a nursing home. She wants to get rid of all her furniture and paperwork even her tax returns. We are currently October 2015 – how many years of tax returns should she keep and for which years?

Question 11: (16 marks)
Please show all calculations for full marks.
Prepare Chris’ 2014 Personal Balance Sheet (refer to Exhibit 2-3 in your online textbook).

Chris Smith
Personal Balance Sheet as of December 31, 2014

Assets $ Amount
Liquid Assets

Real Estate

Personal Possessions

Investment Assets

Total Assets
Liabilities
Current Liabilities

Long-Term Liabilities

Total Liabilities
Net Worth
Question 12: (20 marks)
Calculate Chris’ 2014 cash flow for him to present to the bank for his car loan.
Chris Smith
Cash Flow Statement for the Year Ended December 31, 2014

CASH INFLOW $ Amount
Income

Deductions At Source

TOTAL INFLOWS

CASH OUTFLOWS
Fixed Expenses

Total Fixed Expenses

Variable Expenses

Total Variable Expenses

TOTAL OUTFLOWS
NET SURPLUS/(DEFICIT)
Question 13: (3 marks)
Give 3 goals that Chris should consider for better managing his personal finances.