Final answer:
Out of the transactions listed, two are operating activities: providing services to customers and paying the utility bill. The bank's T-account shows it has a net worth of $220. The line of credit is neither in M1 nor M2; $50 in traveler's checks, $1 in quarters, and $1200 in a checking account are in M1, while the $2000 in a money market account is in M2.
Step-by-step explanation:
Operating Activities
From the given list of transactions, the two that are considered operating activities are:
Provide services to customers for $27,000
Paid the utility bill of $750
Operating activities are the day-to-day activities of a business that involve producing and selling goods and/or providing services, and the associated cash flows. The other transactions listed such as borrowing from the bank, purchasing a delivery truck, and issuing stock are not operating activities; they are financing and investing activities.
Therefore, the correct answer is B) Two.
Bank's T-account Balance Sheet
Let's consider the bank's assets and liabilities to set up a simple T-account balance sheet:
- Assets:
- Reserves: $50
- Government Bonds: $70
- Loans: $500
- Liabilities:
- Deposits: $400
The net worth (or equity) of the bank can be calculated by subtracting the liabilities from the assets:
Total Assets = Reserves + Government Bonds + Loans = $50 + $70 + $500 = $620
Total Liabilities = Deposits = $400
Net Worth = Total Assets - Total Liabilities = $620 - $400 = $220.
Classification in M1 and M2
Let's categorize each item according to M1 and M2 money supply:
a. Your $5,000 line of credit on your Bank of America card: Neither (lines of credit are not money)
b. $50 dollars' worth of traveler's checks you have not used yet: M1
c. $1 in quarters in your pocket: M1
d. $1200 in your checking account: M1
e. $2000 you have in a money market account: M2
Money in M1 includes physical currency and demand deposits, which are funds you can withdraw at any time. M2 includes all of M1 plus savings accounts, money market accounts, and other deposits that are not quite as liquid as those in M1.