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Roberto listed his assets and liabilities on a personal balance sheet.

\begin{tabular}{|c|c|c|c|}
\hline \multicolumn{3}{|c|}{ Roberto's Balance Sheet (September 2013) } \\
\hline \multicolumn{2}{|c|}{ Assets } & \multicolumn{2}{c|}{ Liabilities } \\
\hline cash & [tex]$\$[/tex] 1,800[tex]$ & credit card & $[/tex]\[tex]$ 4,000$[/tex] \\
\hline investments & [tex]$\$[/tex] 6,200[tex]$ & personal loan & $[/tex]\[tex]$ 1,000$[/tex] \\
\hline house & [tex]$\$[/tex] 150,000[tex]$ & mortgage & $[/tex]\[tex]$ 100,000$[/tex] \\
\hline car & [tex]$\$[/tex] 8,000[tex]$ & car loan & $[/tex]\[tex]$ 5,000$[/tex] \\
\hline Total & & Total & \\
\hline
\end{tabular}

After creating the balance sheet, Roberto decided to use his investments to pay off his car loan. How will that decision affect the difference between his assets and liabilities?

A. It will make the assets [tex]$\$[/tex] 5,000[tex]$ less than the liabilities.
B. It will make the assets $[/tex]\[tex]$ 5,000$[/tex] more than the liabilities.
C. The difference between the assets and the liabilities will remain the same.
D. The difference between the assets and the liabilities cannot be compared.



Answer :

GinnyAnswer
Let's solve the problem step-by-step based on the given information.

### Initial Assets and Liabilities:

Roberto's initial assets are:
- Cash: \[tex]$1,800 - Investments: \$[/tex]6,200
- House: \[tex]$150,000 - Car: \$[/tex]8,000

Roberto's initial liabilities are:
- Credit Card: \[tex]$4,000 - Personal Loan: \$[/tex]1,000
- Mortgage: \[tex]$100,000 - Car Loan: \$[/tex]5,000

#### Calculating Total Assets and Liabilities:

Total Assets:
[tex]\[ \text{Total Assets} = \text{Cash} + \text{Investments} + \text{House} + \text{Car} = 1800 + 6200 + 150000 + 8000 = 166000 \][/tex]

Total Liabilities:
[tex]\[ \text{Total Liabilities} = \text{Credit Card} + \text{Personal Loan} + \text{Mortgage} + \text{Car Loan} = 4000 + 1000 + 100000 + 5000 = 110000 \][/tex]

#### Initial Difference between Assets and Liabilities:
[tex]\[ \text{Initial Difference} = \text{Total Assets} - \text{Total Liabilities} = 166000 - 110000 = 56000 \][/tex]

### After paying off the Car Loan with Investments:

Roberto decides to use his investments to pay off his car loan. This will decrease his investments and eliminate the car loan.

[tex]\[ \text{Updated Investments} = 6200 - 5000 = 1200 \][/tex]

After paying off the car loan, the updated list is:

Remaining Assets:
- Cash: \[tex]$1,800 - Investments: \$[/tex]1,200
- House: \[tex]$150,000 - Car: \$[/tex]8,000

Remaining Liabilities:
- Credit Card: \[tex]$4,000 - Personal Loan: \$[/tex]1,000
- Mortgage: \[tex]$100,000 - Car Loan: \$[/tex]0

#### Calculating Updated Total Assets and Liabilities:

Updated Total Assets:
[tex]\[ \text{Total Assets} = \text{Cash} + \text{Investments} + \text{House} + \text{Car} = 1800 + 1200 + 150000 + 8000 = 161000 \][/tex]

Updated Total Liabilities:
[tex]\[ \text{Total Liabilities} = \text{Credit Card} + \text{Personal Loan} + \text{Mortgage} + \text{Car Loan} = 4000 + 1000 + 100000 + 0 = 105000 \][/tex]

#### Updated Difference between Assets and Liabilities:
[tex]\[ \text{Updated Difference} = \text{Total Assets} - \text{Total Liabilities} = 161000 - 105000 = 56000 \][/tex]

### Conclusion:

Both the initial and updated differences between assets and liabilities are \$56,000. Hence, the decision to use investments to pay off the car loan does not change the difference between assets and liabilities.

Therefore, the difference between the assets and the liabilities will remain the same.

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