LESSON How do you create a net worth statement? Constructing a Net Worth Statement 14.3

LESSON

How do you create a net worth statement?

Constructing a Net Worth Statement14.3

ADDITIONAL EXAMPLE 1Andy paid off his car, which is worth $8,000. He owes 6 monthly installments of $85 each for his sound system. He pays $75 per month for his cable service, and his contract lasts 1 year. He has $472 in his checking account and $2,735 in his savings account. Andy also owes $446 on his credit card. His electronic appliances are valued at $2,075. His share of the rent and utilities for the apartment he shares with a roommate is $545 per month, and his lease lasts for another 8 months. What is Andy’s current net worth? $7,066

14.3 LESSON QUIZ

Stan owns his scooter, which is worth $3,100. He owes 6 monthly payments of $35 each for his stereo. He pays $45 per month for his cell phone, and his current contract lasts for 1 year. He has $463 in his checking account and $1,375 in savings. Stan also owes $345 on his credit card. His vintage guitar is valued at$2,100. His part of the rent and utilities for the apartment he shares is $450 per month, and the lease lasts for another 8 months.

7.13.C

What are Stan’s total assets?1.

$7,038

What are Stan’s total liabilities?2.

$4,695

What is his current net worth?3.

$2,343

Angela pays for a flat-screen television with her credit card. The value of the television is $1,300. She pays cash for a new computer. The value of the computer is $2,100.

Is the television an asset or a liability?4.

The television is a liability because Angela owes money for it, having paid for it with her credit card.

Is the computer an asset or a liability? Explain.5.

The computer is an asset because she owns it, having paid for it with cash.

Evan owes 6 monthly payments of $135 each for his motorcycle. When he bought the motorcycle 3 years ago, he paid $5,500 for it. He pays $50 per month for his cell phone and has 1 year remaining on his contract. He has $686 in his checking account and $1,200 in savings. He owes $637 on his credit card. His rent is $425 per month, and his lease lasts for another 5 months. Evan calculated his net worth to be $4,024. Part of the table he made to calculate his net worth is shown below. Did Evan find his net worth correctly? Explain.

No. Evan does not own the motorcycle, so it should be listed as a liability and not as an asset. The amount of the liability is 6 × $135 = $810. His reasoning is incorrect because he will not be able to sell it for the $5,500 he paid 3 years ago. He would need to do some research to find the current value of the motorcycle; that amount can be counted as an asset. His current net worth could then be calculated.

How do you create a net worth statement?

Sample answer: Find the cash value of all your assets and the cash value of all your liabilities. Subtract your total liabilities from your total assets to get your net worth.