Question

Neal's home has been foreclosed on and sold at a Sheriff's sale. The sale brought in $500,000 and the total liabilities on the home were $425,000. Who receives the additional $75,000

Answer 1

Neal receives the additional $75,000.

What are liabilities?

• A liability is defined in financial accounting as the future sacrifices of economic benefits that an entity is obligated to make to other entities as a result of past transactions or other past events, the resolution of which may result in the transfer or use of assets, provision of services, or another future yielding of economic benefits.
• A company's assets are what it owns, while its liabilities are what it owes.

• Both are included on a firm's balance sheet, which is a financial statement that demonstrates the financial health of the company.
• Equity, or an owner's net worth, is equal to assets with fewer liabilities

Liability Examples -

1. Bank indebtedness Debt from a mortgage.
2. Suppliers owe money (accounts payable) Wages are owing.
3. Taxes are owing.

• In the given situation Neal was the owner and so it will have the liability of $425,000 and the additional amount of $75,000.

Therefore, Neal receives the additional $75,000.

Know more about liabilities here:

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