As discussed in the "All About You" feature, in order to evaluate your personal financial position, you need to prepare a personal balance sheet. Assume that you have gathered the following information about your current personal finances.
Amount owed on student loan (long-term) .......................... $10,000
Balance in chequing account ............................................. 1,200
Automobile ................................................................. 8,000
Balance on automobile loan (short-term) ............................... 2,400
Balance on automobile loan (long-term) ............................... 3,600
Computer and accessories ................................................ 1,200
Clothes and furniture ..................................................... 4,000
Balance owed on credit cards .......................................... 1,000
Instructions
(a) Prepare a personal balance sheet using the format you have learned for a balance sheet for a proprietorship. For the Capital account, use Personal Equity (Deficit).
(b) Assume that you borrow an additional $5,000 in student loans to cover the cost of tuition for the upcoming school year. What is the impact on your Personal Equity (Deficit) if the cost of tuition is considered an expense? What is the impact on your Personal Equity (Deficit) if the cost of tuition is considered an asset?
(c) Assume that, instead of borrowing to cover the cost of tuition, you earn $8,000 working during the summer and that after paying for your tuition you have $2,000 in your chequing account. What is the impact on your Personal Equity (Deficit) if the cost of the tuition is considered an expense?
(d) Assume that you make a $600 payment from your chequing account on your automobile loan. What is the impact on your Personal Equity (Defi cit)?