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.
Answer to relevant QuestionsWhat is an income statement, and what are its components? In your answer, distinguish between flexible and inflexible expenses. Discuss the process of setting goals. List several general goals that you think will be important to you after graduation and then indicate which specific goals you will use in your annual budgets. Would you classify the following expense items as flexible or inflexible? Which one(s) would you consider sunk costs? a. Property taxes b. House mortgage payments c. Clothing d. Car licenses e. Insurance f. Family members’ ...Arrange the following items in their appropriate sequence according to the federal income tax formula: a. Adjusted gross income b. Adjustments to income c. Itemized deductions d. Tax credits e. Gross income items f. ...What are estate, gift, and inheritance taxes?
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