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29 December, 14:39

Mandy and Jeff have a net worth of $25,000 and total assets of $140,000. If their revolving credit and unpaid bills total $2,200, what are their total liabilities?

a. $115,000

b. $140,000

c. $142,200

d. $165,000

e. $167,200

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  1. 29 December, 14:47
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    A) $115,000

    Explanation:

    Total liability is defined as the total or sum of all obligations a firm has to others or third party. Total liability is comprised of both the current liabilities (obligations due within a year) and Long-term liabilities (obligations due from 2 years and above).

    The formula for total liability that is relevant to this question is as follows;

    Total assets = Total Liabilities + Net worth

    $140,000 = Total Liabilities + $25,000

    Total Liabilities = $140,000-$25,000

    = $115,000

    Note that the bill of $2,200 was not considered because it is already a part of total liabilities, meaning it is already accounted for in $115,000
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