Question Completion:
On September 30, Ashley and Jason started arguing about who is better off. Jason said he was better off because he owned a PlayStation console that he bought last year for dollar 250. He figures that, if needed, he could sell it to a friend for dollar 180. Ashley argued that she was better off because she had dollar 1, 000 cash in her bank account and a piece of art that she bought two years ago for dollar 800 but could now probably sell for dollar 1, 400. Jason countered that Ashley still owed dollar 250 on a loan and that Jason's dad promised to buy him a Porsche if he does really well in his accounting class. Jason said he had dollar 6, 000 cash in his bank account right now because he just received a dollar 4, 800 student loan. Ashley knows that Jason also owes a tuition installment of dollar 800 for this term. Ashley and Jason met again in early November. They asked how each other was doing. Ashley claimed that she'd become much more successful than Jason. She had a part-time job, where she earned dollar 1, 500 per month. Jason laughed at Ashley because he had won dollar 1, 950 on a lottery ticket he bought in October, and that was merely for the "work" of standing in line for a minute. It was just what he needed because his apartment costs dollar 800 each month. Ashley, on the other hand, pays dollar 470 for her share of the rent. Both Ashley and Jason have other normal living costs that total dollar 950 each month.
Answer:
a) Comparison of Assets and Liabilities as of September 30:
List of Assets (ownings) and Liabilities (owings):
Ashley Jason
Net Worth $2,150 $680
Ashley is certainly better off as of September 30.
Explanation:
a) Data and Calculations:
List of Assets (ownings) and Liabilities (owings):
Ashley Jason
Playstation $280
Cash balance $1,000 $6,000
Artwork 1,400
Porsche car
Liabilities:
Payable (250) (4,800)
Tuition Payable (800)
Net Worth $2,150 $680
b) To compare what Ashley and Jason own and owe, I list their assets and liabilities by preparing a balance sheet as of September 30 for each person. This helps to determine the missing value called "net worth." The missing value is the basis for making the comparison. Therefore, I subtract the liabilities from the assets, to obtain the net worth of each individual. In a business setting, it is called the Owners' Equity. This actually shows what belongs to Ashley and Jason when their liabilities are taken away from their assets. The Porsche had no value attached as it is a contingent asset (it depends on Jason getting a good grade in accounting). The event is not probable and the amount of the promise cannot be reasonably ascertained at this point.
