Future Business Leaders of America (FBLA) Business Calculations Practice Test

What is the ownership equity of Bill who bought a car for $2400 and financed it over 12 equal monthly payments?

1. Bill- $2400; Mary -$1800

2. Bill-$2400; Mary-0

3. Bill-$2520; Mary-0

4. Bill-$210; Mary-$150

The correct answer is: Bill-$2400; Mary-0

To determine Bill's ownership equity in the car, it is essential to understand that ownership equity refers to the value of the asset that Bill owns outright, which is calculated as the total value of the asset minus any liabilities associated with that asset. In this scenario, Bill purchased a car valued at $2400 and financed it. If the financing is structured as a loan where Bill is making monthly payments, it does not immediately affect his ownership equity in terms of how much he owns right away. Ownership equity can change over time as payments are made, but at the point of purchase, the total value of the asset is $2400. Since the context does not indicate that Bill has made any payments yet, he is the sole owner of the car and has a total equity equal to the full purchase price. Since there is no mention of any financing costs or early payments affecting this amount in the question, we conclude that his ownership equity is indeed $2400, with no equity belonging to anyone else, as no additional owner is indicated. Therefore, the choice that reflects Bill having full ownership of the car with no shared equity with another individual is the correct answer.