Series 7 Exam Question 375: Answer and Explanation

Question: 375

Use the following exhibit to answer this question:

Balance Sheet of ABCD Corp.
Assets		Liabilities
Cash	$300,000	Accounts payable	$300,000
Accounts receivable	$1,500,000	Taxes payable	$250,000
Inventory	$1,200,000	Bonds maturing this year	$800,000
Goodwill	$2,000,000	Bonds maturing in 5 years	$2,000,000
Machinery	$1,500,000
Land	$5,000,000

What is the net worth of ABCD Corporation?

• A. $3,150,000
• B. $1,650,000
• C. $8,150,000
• D. $10,150,000

Correct Answer: C

Explanation:

C. To determine the net worth (stockholder's equity) of a company, use the following equation:

net worth = assets - liabilities

net worth = $11,500,000 - $3,350,000 = $8,150,000

Remember to add all of the numbers under the Assets side of the balance sheet and subtract all of the numbers under the Liabilities side of the balance sheet.