What were the financial circumstances of Ellen in 2021 and how did they result in a net loss of $25,000?
Ellen loaned Nicole $45,000 to start a business that failed, resulting in a loss of $45,000 that will not be recovered. In addition, Ellen had $20,000 in income from her part-time job in 2021. To calculate the net loss, we subtract the loss from the income: $20,000 - $45,000 = -$25,000. Ellen experienced a net loss of $25,000 due to the failed business venture.
Ellen's Financial Situation in 2021
Ellen's Loan to Nicole:
Ellen loaned Nicole $45,000 to start a hair salon, which unfortunately failed, leaving Ellen with a loss of $45,000.
Ellen's Income:
In addition to the failed loan, Ellen had $20,000 in income from her part-time job in 2021. This income was separate from the loan and represented money earned from another source.
Calculation of Net Loss
To calculate Ellen's net loss in 2021, we subtract her loss from her income:
Net loss = Income - Loss
Net loss = $20,000 - $45,000
Net loss = -$25,000
Understanding Ellen's Net Loss:
Ellen's net loss of $25,000 indicates that after accounting for both her income and the loss from the failed loan, she had a negative balance of $25,000 overall.
In summary, Ellen's financial situation in 2021 involved a significant loss of $45,000 from the failed loan to Nicole, which, combined with her income of $20,000, resulted in a net loss of $25,000 for the year.