Question

Which of the following modifications to the list of assets and liabilities below would result in a net worth of $100,000?
Recreational Vehicle valued at $110,000.
Car valued at $27,000.
Medical bills totaling $8,700.
Loan balance of $80,000.
Savings of $5,000.
Retirement fund of $50,000.
Credit card balance of $2,300.
a.
recreational vehicle value decreasing to $100,000
b.
borrowing $10,000 more in loans
c.
withdrawing $20,000 from the retirement fund
d.
adding $1,000 in credit card debt

Answer 1

To determine which modifications would result in a net worth of $100,000, let's first calculate the current net worth based on the provided assets and liabilities.

**Assets:**
- Recreational Vehicle: $110,000
- Car: $27,000
- Savings: $5,000
- Retirement Fund: $50,000

**Total Assets:**
\[ 110,000 + 27,000 + 5,000 + 50,000 = 192,000 \]

**Liabilities:**
- Medical Bills: $8,700
- Loan Balance: $80,000
- Credit Card Balance: $2,300

**Total Liabilities:**
\[ 8,700 + 80,000 + 2,300 = 91,000 \]

**Net Worth Calculation:**
\[
\text{Net Worth} = \text{Total Assets} - \text{Total Liabilities}
\]
\[
\text{Net Worth} = 192,000 - 91,000 = 101,000
\]

The current net worth is $101,000. We need to adjust it to $100,000, which means we need to decrease the net worth by $1,000.

Let's analyze each modification option:

a. **Recreational vehicle value decreasing to $100,000**
- **New Net Worth**:
\[
(100,000 + 27,000 + 5,000 + 50,000) - 91,000 = 91,000
\]
- This decreases net worth by $1,000, bringing it to $100,000. **(This modification works)**

b. **Borrowing $10,000 more in loans**
- **New Net Worth**:
\[
192,000 - (91,000 + 10,000) = 192,000 - 101,000 = 91,000
\]
- This would decrease the net worth to $91,000. **(This modification does not work)**

c. **Withdrawing $20,000 from the retirement fund**
- **New Net Worth**:
\[
(110,000 + 27,000 + 5,000 + (50,000 - 20,000)) - 91,000 = 192,000 - 91,000 = 101,000
\]
- This keeps the net worth the same at $101,000. **(This modification does not work)**

d. **Adding $1,000 in credit card debt**
- **New Net Worth**:
\[
192,000 - (91,000 + 1,000) = 192,000 - 92,000 = 100,000
\]
- This decreases the net worth by $1,000, bringing it down to $100,000. **(This modification works)**

**Conclusion**: Options **a** and **d** would result in a net worth of $100,000.