Final answer:
To calculate a bank's net worth, list reserves, bonds, and loans as assets and deposits as liabilities. Subtract liabilities from assets to find the net worth, which in this case is $220.
Step-by-step explanation:
Setting Up a Bank's T-Account and Calculating Net Worth
When setting up a T-account balance sheet for a bank, we divide the account into two columns: assets on the left and liabilities plus equity on the right.
Within the assets column, we list reserves of $50, government bonds worth $70, and loans of $500.
In the liabilities plus equity column, we include the deposits of $400 and the net worth, which is the difference between the total assets and liabilities.
The bank's assets sum up to $620 ($50 in reserves + $70 in government bonds + $500 in loans). Its liabilities are $400 in deposits. The bank's net worth is the difference between total assets and liabilities:
Net Worth = Assets - Liabilities
= $620 - $400
= $220.
Therefore, the bank's net worth is $220.