Question: Lisa Rich spent every cent she had and then borrowed
Lisa Rich spent every cent she had and then borrowed $1,000 to purchase an elaborate wardrobe worth $2,000. Ignoring all of Lisa’s other assets and liabilities, construct her balance sheet after the purchase. Suppose that a year later, Lisa’s wardrobe—now completely out of style—is worth only $100. If Lisa has paid off $500 of her loan, what does her balance sheet look like now? Comment on her present financial position.
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