Question

Mandy and Jeff have a net worth of $25,000 and total assets of $140,000. If their revolving credit and unpaid bills total $2,200, what are their total liabilities?

a. $115,000
b. $140,000
c. $142,200
d. $165,000
e. $167,200

Answer 1

A) $115,000

Step-by-step explanation:

Total liability is defined as the total or sum of all obligations a firm has to others or third party. Total liability is comprised of both the current liabilities (obligations due within a year) and Long-term liabilities (obligations due from 2 years and above).

The formula for total liability that is relevant to this question is as follows;

Total assets = Total Liabilities + Net worth

$140,000= Total Liabilities + $25,000

Total Liabilities = $140,000-$25,000

= $115,000

Note that the bill of $2,200 was not considered because it is already a part of total liabilities, meaning it is already accounted for in $115,000