Question

Mr. Chavez has assets of $250,000 and liabilities of $18,000. He decides to finance the entire amount of the purchase of a car valued at $26,000. Which of the following is true?

a.

Mr. Chavez increased his assets.


b.

Mr. Chavez increased his net worth.


c.

Mr. Chavez increased both his assets and net worth.


d.

Mr. Chavez did not increase his assets or his net worth.

Answer 1

A, mr Chavez increased his assests

Answer 2

Mr. Chavez increased his assets.

Explanation:

Given is :

Mr. Chavez has assets of $250,000 and liabilities of $18,000.

He decides to finance the entire amount of the purchase of a car valued at $26,000.

So, he has taken a loan to purchase the asset. This will increase the assets in the form of his car and the the liability also in the form of loan.

This will have no impact on Mr. Chavez's net worth as the loan is taken to buy the asset.

So, only correct option is option A. Mr. Chavez increased his assets.