Question

The following data apply to Pro Beauty Supply Incorporated for May, Year 2: Balance per the bank on May 31, $14,220. Deposits in transit not recorded by the bank, $1,530. Bank error; check written by Best Beauty Supply was charged to Pro Beauty Supply’s account, $800. The following checks written and recorded by Pro Beauty Supply were not included in the bank statement: 3013 $ 185 3054 580 3056 1,970 Note collected by the bank, $750. Service charge for collection of note, $21. The bookkeeper recorded a check written for $615 to pay for the May utilities expense as $525 in the cash disbursements journal. Bank service charge in addition to the note collection fee,

Answer 1

When Singleton Bank lends $9 million to Hank's Auto Supply, the bank records it as an asset on the balance sheet. The deposits at First National rise by $9 million and its reserves also rise by $9 million.

The subject of this question is Business.

When Singleton Bank lends $9 million to Hank's Auto Supply, it records this loan as an asset on the balance sheet. This loan generates interest income for the bank. The bank issues a cashier's check to Hank's Auto Supply, who then deposits the loan in their regular checking account with First National. As a result, the deposits at First National rise by $9 million and its reserves also rise by $9 million. First National must hold 10% of additional deposits as required reserves but is free to loan out the rest.