Using the data below, calculate living expenses. Assets $100,000 Liabilities 37,500
Prior year's net worth 32,500
Income 55,000
A) $57,500
B) $17,500
C) $20,000
D) $25,000

Question

Quizplus · Accepted Answer

To calculate living expenses, we need to use the following formula:
Living expenses = Income - (Prior year's net worth + Change in net worth)
Change in net worth = Assets - Liabilities
Change in net worth = $100,000 - $37,500 = $62,500
Living expenses = $55,000 - ($32,500 + $62,500)
Living expenses = $55,000 - $95,000
Living expenses = -$40,000
Since we have a negative result, it means that the person is not able to cover their living expenses with their income and net worth. The best answer choice is D, which is the closest to the actual result.

Using the Data Below, Calculate Living Expenses