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

\begin{tabular}{|c|c|c|c|}
\hline \multicolumn{4}{|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 \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 go through the process step by step to determine the impact of Roberto's decision on the difference between his assets and liabilities.

### Initial Balance Sheet

#### Assets:
- Cash: \[tex]$1,800 - Investments: \$[/tex]6,200
- House: \[tex]$150,000 - Car: \$[/tex]8,000

To find the total initial assets, we sum them up:

[tex]\[ \text{Total Initial Assets} = \$1,800 + \$6,200 + \$150,000 + \$8,000 = \$166,000 \][/tex]

#### Liabilities:
- Credit Card: \[tex]$4,000 - Personal Loan: \$[/tex]1,000
- Mortgage: \[tex]$100,000 - Car Loan: \$[/tex]5,000

To find the total initial liabilities, we sum them up:

[tex]\[ \text{Total Initial Liabilities} = \$4,000 + \$1,000 + \$100,000 + \$5,000 = \$110,000 \][/tex]

#### Initial Difference:
To find the initial difference between assets and liabilities, we subtract the total liabilities from the total assets:

[tex]\[ \text{Initial Difference} = \$166,000 - \$110,000 = \$56,000 \][/tex]

### After Paying Off the Car Loan with Investments

Roberto decides to use his investments to pay off his car loan. This decreases his investments and eliminates his car loan:

[tex]\[ \text{New Investments} = \$6,200 - \$5,000 = \$1,200 \][/tex]

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

To find the updated total assets, we sum them up again:

[tex]\[ \text{Total Updated Assets} = \$1,800 + \$1,200 + \$150,000 + \$8,000 = \$161,000 \][/tex]

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

To find the updated total liabilities, we sum them up:

[tex]\[ \text{Total Updated Liabilities} = \$4,000 + \$1,000 + \$100,000 + \$0 = \$105,000 \][/tex]

#### New Difference:
To find the new difference between assets and liabilities, we subtract the updated total liabilities from the updated total assets:

[tex]\[ \text{New Difference} = \$161,000 - \$105,000 = \$56,000 \][/tex]

### Comparing the Differences
- Initial Difference: \[tex]$56,000 - New Difference: \$[/tex]56,000

The difference between the assets and liabilities remains the same.

Therefore, the correct answer is:
The difference between the assets and the liabilities will remain the same.