Question

The following table shows the assets and liabilities of the Smith family in 2005 and 2009.

2005
2009
home valued at $200,000
home valued at $180,000
mortgage of $30,000
home equity loan of $18,000
car valued at $25,000
car valued at $18,000
car loan of $8,000
boat valued at $20,000

personal loan of $5,000

Based on the table, which of the following is true?
a.
From 2005 to 2009, both assets and liabilities decreased.
b.
From 2005 to 2009, both assets and liabilities increased.
c.
From 2005 to 2009, assets decreased and liabilities increased.
d.
From 2005 to 2009, assets increased and liabilities decreased.

Answer 1

a. Both decreased.

2005 totals: assets = 200,000 + 25,000 + 20,000 = 245,000; liabilities = 30,000 + 8,000 = 38,000.
2009 totals: assets = 180,000 + 18,000 = 198,000; liabilities = 18,000 + 5,000 = 23,000.

Both assets (245,000 → 198,000) and liabilities (38,000 → 23,000) decreased.