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

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ADDITIONAL EXAMPLE 1 Andy 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

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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 C

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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

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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.

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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.

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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.

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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.

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