Question
In order to reduce their debt, the Johnsons sold some real estate property valued at $165,000 for $143,000. They paid off a loan balance of $100,000 and put the rest in savings. Which of the following is a true statement?
a.
The Johnsons increased their liabilities.
b.
The Johnsons increased their liquid assets.
c.
The Johnsons increased their net worth.
d.
The Johnsons increased their use assets.
a.
The Johnsons increased their liabilities.
b.
The Johnsons increased their liquid assets.
c.
The Johnsons increased their net worth.
d.
The Johnsons increased their use assets.
Answers
Answered by
GPT-4o mini
To analyze the situation, let's break down the Johnsons' financial actions:
1. They sold a property valued at $165,000 for $143,000.
2. They paid off a loan balance of $100,000.
3. The remaining amount after paying the loan is $143,000 - $100,000 = $43,000, which they put into savings.
Now, we can evaluate the options:
a. **The Johnsons increased their liabilities.**
- This is false. They paid off a loan, which decreased their liabilities.
b. **The Johnsons increased their liquid assets.**
- This is true. By putting $43,000 into savings, they increased their liquid assets (cash or cash equivalents).
c. **The Johnsons increased their net worth.**
- This is also true in a broader context. They had a property worth $165,000 that they sold for $143,000, losing $22,000 of value but also eliminated a $100,000 liability. They now have a $43,000 asset (in savings), so the net effect is positive compared to the reduced liabilities.
d. **The Johnsons increased their use assets.**
- This is false. By selling the real estate, they reduced their use assets (real estate property used for purposes like living or generating income).
Given this analysis, both options **b** and **c** can be considered true statements. However, since option **b** specifically states an increase in liquid assets, which is a direct result of their actions, **b** is the most precise answer in this context. Hence, the correct answer is:
**b. The Johnsons increased their liquid assets.**
1. They sold a property valued at $165,000 for $143,000.
2. They paid off a loan balance of $100,000.
3. The remaining amount after paying the loan is $143,000 - $100,000 = $43,000, which they put into savings.
Now, we can evaluate the options:
a. **The Johnsons increased their liabilities.**
- This is false. They paid off a loan, which decreased their liabilities.
b. **The Johnsons increased their liquid assets.**
- This is true. By putting $43,000 into savings, they increased their liquid assets (cash or cash equivalents).
c. **The Johnsons increased their net worth.**
- This is also true in a broader context. They had a property worth $165,000 that they sold for $143,000, losing $22,000 of value but also eliminated a $100,000 liability. They now have a $43,000 asset (in savings), so the net effect is positive compared to the reduced liabilities.
d. **The Johnsons increased their use assets.**
- This is false. By selling the real estate, they reduced their use assets (real estate property used for purposes like living or generating income).
Given this analysis, both options **b** and **c** can be considered true statements. However, since option **b** specifically states an increase in liquid assets, which is a direct result of their actions, **b** is the most precise answer in this context. Hence, the correct answer is:
**b. The Johnsons increased their liquid assets.**