Sam and his wife, Ann, purchased a home in Lubbock, Texas, in 1980 for $100,000. Their original home mortgage payment was $90,000. The house has a current market value of $175,000 and a replacement value of $200,000. They still owe $55,000 of their home mortgage payment. On their current balance sheet, their home will be reflected as:

Question

Quizplus · Accepted Answer

The home should be reflected on the current balance sheet as the current market value of $175,000 which is an asset, and the outstanding mortgage of $55,000 which is a liability. The original mortgage payment and replacement value are not relevant to the current value of the home.

Sam and His Wife, Ann, Purchased a Home in Lubbock