If a farm has assets of $800,000 and liabilities of $420,000, the net worth is

If a farm has assets of $800,000 and liabilities of $420,000, the net worth is

• A. $380,000
• B. $1,220,000
• C. $1,000,000
• D. $420,000

Answer: (A)

Net worth is the amount of assets left after paying off liabilities. It equals assets minus liabilities. Here, 800,000 minus 420,000 equals 380,000, so the farm’s net worth is 380,000. If you added assets and liabilities you’d get 1,220,000, which isn’t net worth, and using only one side (either assets or liabilities) doesn’t reflect what remains after debts are settled.

Net worth is the amount of assets left after paying off liabilities. It equals assets minus liabilities. Here, 800,000 minus 420,000 equals 380,000, so the farm’s net worth is 380,000. If you added assets and liabilities you’d get 1,220,000, which isn’t net worth, and using only one side (either assets or liabilities) doesn’t reflect what remains after debts are settled.