Question

The assets and liabilities of a local surf shop are listed below.

Building Mortgage $109,850
Other Debt $35,988
Accounts Receivable $10,760
Property Value $162,974
Long Term Investments $238,000
Small Business Loan $62,700
Long Term Liabilities $38,000
Owned Inventory $72,980
Cash $215,083
Savings Account $128,721
Owned Equipment $30,971


The surf shop owner receives notice that the property value has increased by $20,000. What is the net worth of the surf shop?
$859,489
$879,489
$612,951
$632,951

PLEASE HELP

Answer 1

Answer: $879,489

Explanation:

When it comes to a business net worth is simple:

assets - liabilities = net worth.

Assets are an expenditure that has utility through multiple future accounting periods. For example, a company pays its electrical bill. This expenditure covers something (electricity) that only had utility during the billing period; therefore, it is recorded as an expense.

Conversely, the company buys a machine, that it expects to use for the next five years. Since this expenditure has utility through multiple future periods, it is recorded as an asset.

Cash, savings, inventory, investments, equipment, and receivables are also assets. Basically, anything that is owned and could be liquidated for cash.

• Accounts Receivable $10,760
• Property Value $162,974
• Long-Term Investments $238,000
• Owned Inventory $72,980
• Cash $215,083
• Savings $128,721
• Owned Equipment $30,971

In simple terms a liability is something that is owed to someone else:

• Building Mortgage $109,850
• Other Debt $35,988
• Small Business Loan $62,700
• Long-Term Liabilities $38,000