1.) If yout total assets equal $87,000 and your total liabilities equal $10,000;

Question

1.) If yout total assets equal $87,000 and your total liabilities equal $10,000; your solvency ratio is?

2.) Jack and Jill have a montly income of $5000, but they pay $1000 per month in taxes. They also pay $2000 per month in various loan expenses. What is their debt service ratio?

3.) Sam and his wife Ann purchased a home in Lubbock, Texas in 1980for $100,000. Their original home mortgage was for $90,000. Thehouse has a current market value of $175,000 and a replacement value of

$200,000. They still owe $55,000 on their home mortgage. Sam and Sally are now constructing their balance sheet. How should their home be reflected on their current personal balance sheet?

Explanation / Answer

1) Solvency ratio = Total liabilities/Total assets = 10000/87000 = 0.1149

2)Debt service ratio = Loan expenses/Pre tax income = 2000/5000 = 0.43)

3)In case of Personal balance sheet Fixed assets are recorded at thier market value.Hence the value of the house

= Market value = $175000

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.