Read the below scenario. Choose the type of financial statement that would best describe what is...
Read the below scenario. Choose the type of financial statement that would best describe what is occurring financially.
You want to buy a home. The home is worth $100,000 and you have $25,000 in the bank. You go to the bank to get a $75,000 loan. The bank agrees and you receive $75,000 from the bank to buy the home. What financial statement would best describe this scenario?
*Hint:
- What is your equity (how much you had in the bank)?
- What are your liabilities (these are obligations you have to pay back)?
- Once you purchase the home, can you consider that an asset?
|
Income Statement |
||
|
Balance Sheet |
||
|
Statement of Cash Flows |
||
|
Changes in Net Assets |
Homework Answers
Equity = $25,000 (Amount in the bank)
Liabilities = $75,000 (Loan taken from bank)
Increase in assets = $75,000 (Home purchased is an assets)
| Balance sheet | Assets and liabilities both will increase by $75,000 |
| Statement of cash flow | Cash flows from financing activities $75,000 |
| Cash used in investing activities - $75,000 |
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