John Doe\'s Financial Data (hypothetical) 4 Financial Data Year1 Year2 Year3 6 R

Question

John Doe's Financial Data (hypothetical) 4 Financial Data Year1 Year2 Year3 6 Residence 7 Automobiles 8 Stocks and bonds 9 Boat 10 CDs $100,000$100,000$100,000 90,000 30,000 30,000 40,000 30,000 30,000 25,000 225,000 20,000 30,000 25,000 175,000 300,000 12 13 Mortgage balance 14 Auto loan 15 16 17 Salary 18 Other Income 19 20 21 Mortgage Payments 22 Auto loan payments 90,000 10,000 100,000 40,000 5.000, 45,000 37,000 4,000 41,000 40,000 4,000, 44,000 42,000 4,000 46,000 6,000 2,000 15,000 23,000 6,000 2,500 15,000 23,500 6,000 2,500 20000 28,500 23 Other living expenses 24 25 26 27 calculate the amount of unknown income. 28 29 Net worth method 30

Explanation / Answer

Net worth of John Doe in first year = Total assets - Total liabilities = 175000-100000 = 75000

Income = 41000, Expenses = 23000, surplus = 41000-23000 = 18000

Net worth in second year = 225000-45000= 180000

Change in net worth from year 1 to year 2 = 180000-75000= 105000. We have only 18000 surplus so unknown income is = 105000-18000= 87000

Year 2 income = 44000, year 2 expenses = 23500 year 2 surplus = 44000-23500 = 20500

Year 3 networth = 300000-0=300000, change in net worth from year 2 to year 3=300000-180000= 120000

We have only 20500 surplus, so unknown income = 120000-20500 =99500

So total unknown income = 87000+99500 = $186500

The above net worth method works on the logic that the additional increase in net worth has got to be reflected in increase in income and surplus savings after expenses.

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---

---

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