Question

Which of the following modifications to the list of assets and liabilities below would result in an increase in net worth?

Cash of $300.
Car valued at $28,000.
Car loan of $22,000.
Motorcycle valued at $6,000.
Savings of $2,000.
Credit card balances of $4,000.
Student loan of $10,000.
a.
putting $100 in savings
b.
paying $100 on credit cards
c.
getting paid $100
d.
all of the above

Answer 1

a and d because money is coming in

Answer 2

Option D : all of the above is the answer.

Explanation:

Net worth = Assets - liabilities

The assets are :

Cash of $300.

Car valued at $28,000.

Motorcycle valued at $6,000.

Savings of $2,000.

Total =
`300+28000+6000+2000=36300` dollars.

The liabilities are :

Car loan of $22,000.

Credit card balances of $4,000.

Student loan of $10,000.

Total =
`2000+4000+10000=36000` dollars

Net worth =
`36300-36000=300` dollars

So, if we put $100 in savings it will increase the net worth by $100 as it is an asset.

If we pay $100 on credit cards, it will also lower the liability by $100 and increase the net worth by $100.

And if you are getting paid $100, its an asset, so your net worth increases.

Therefore, option D : all of the above is the answer.