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

Answer: c.

Explanation:
- Putting $100 into savings is just moving cash to another asset (no change in total assets), so net worth stays the same.
- Paying $100 on credit cards reduces both assets (cash/savings) and liabilities by $100, so net worth is unchanged.
- Getting paid $100 increases your assets without increasing liabilities, so net worth increases by $100.