Question

The Coopers have a net worth of $250,000 before any of the following transactions:

Paid off credit cards of $9,000 using a savings account

Transferred $5,000 from checking to their IRAs

Purchased $2,500 of furniture with credit

What is the Coopers' net worth after these transactions?

Answer 1

Net Worth = Assets - Liabilities

1) Paid off credit cards of $9,000 using a savings account = Booking of Expenses of 9000 will reduce assets for payment by 9000

2) Transferred $5,000 from checking to their IRAs = Will reduce Cash as Asset will increase retirement asset by same amount, thus no impact on net worth

3) Purchased $2,500 of furniture with credit = Will increase asse on one side and liabilitiy on other, thus no impact on net worth

(Thus only transaction 1 will reduce Asset (assuming credit card due for expenses NOT already accounted)

Net Worth Before Transaction = $ 250,000

Net Worth After Transaction = $ 250,000 - 9000 = $ 241,000