A farm has total assets of 500,000 and total liabilities of 420,000. The net worth is

A farm has total assets of 500,000 and total liabilities of 420,000. The net worth is

• A. 80,000
• B. -80,000
• C. 0
• D. 920,000

Answer: (A)

Net worth is the owner's equity in the farm and is found by subtracting total liabilities from total assets. Here, assets are 500,000 and liabilities are 420,000, so net worth = 500,000 − 420,000 = 80,000. This positive result means the farm has $80,000 of equity after debts are accounted for. The other numbers would require different relationships: a negative value would mean liabilities exceed assets, zero would mean assets equal liabilities, and 920,000 would be the sum of assets and liabilities rather than the owners’ equity.

Net worth is the owner's equity in the farm and is found by subtracting total liabilities from total assets. Here, assets are 500,000 and liabilities are 420,000, so net worth = 500,000 − 420,000 = 80,000. This positive result means the farm has $80,000 of equity after debts are accounted for. The other numbers would require different relationships: a negative value would mean liabilities exceed assets, zero would mean assets equal liabilities, and 920,000 would be the sum of assets and liabilities rather than the owners’ equity.