Question

On January 1, 2018, the Happy Corporation had a credit balance in the retained earnings account of $1,000,000. During 2018, various events occurred related to net income, adjustments, and dividends. Prepare a retained earnings statement with the provided data.

Answer 1

To set up a T-account balance sheet for the bank, we list the bank's assets and liabilities. The bank's assets include its reserves, government bonds, and loans it has made. The liabilities consist of the deposits it holds. The bank's net worth is calculated by subtracting its liabilities from its assets.

Step-by-step explanation:

To set up a T-account balance sheet for the bank, we need to list the bank's assets and liabilities. Assets are what the bank owns or has claims to, while liabilities are what the bank owes to others. The bank's assets include its reserves of $50, the government bonds worth $70, and the loans it has made of $500, for a total of $620. Its liabilities consist of the deposits it holds, which amount to $400. The bank's net worth can then be calculated by subtracting its liabilities from its assets, giving us a net worth of $220.