Roberto listed his assets and liabilities on a personal balance sheet. Roberto’s Balance Sheet (September 2013)AssetsLiabilitiescash$1,800credit card$4,000investments$6,200personal loan$1,000house$150,000mortgage$100,000car$8,000car loan$5,000Total Total 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?
Answer
A
It will make the assets $5,000 less than the liabilities.
B
It will make the assets $5,000 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.
Explanation
Using $5,000 of investments to pay off the $5,000 car loan reduces assets by $5,000 and liabilities by $5,000. Before the payment, assets total $166,000 and liabilities total $110,000, a difference of $56,000. Afterward, the difference is still $56,000, so it remains the same.
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